- Hertz shares were halted Wednesday morning after the Securities and Exchange Commission revealed issues it had with the company’s planned stock offering.
- The car-rental chain aims to sell as much as $US500 million worth of stock in a desperate fundraising effort, though it has warned the shares could become worthless through bankruptcy proceedings.
- SEC Chairman Jay Clayton told CNBC on Wednesday “we have comments on their disclosure,” adding that, in most cases, firms with such issues “do not go forward until those comments are resolved.”
- Hertz shares were frozen at $US1.95, down slightly from Tuesday’s close.
- Watch Hertz trade live here.
Trading of Hertz stock was paused Wednesday morning after the Securities and Exchange Commission alerted the firm to issues it had with a planned stock sale.
The car-rental chain filed for bankruptcy on May 22 and has since seen its stock price trade with outsized volatility as retail traders bet on a miraculous recovery. Hertz’s latest fundraising plan involved selling up to $US500 million in stock to take advantage of its recent rally. Yet the plan could be under fire after the SEC raised concerns with the sale.
“In this particular situation, we have let the company know that we have comments on their disclosure,” Jay Clayton, chairman of the SEC, said on CNBC on Wednesday. “In most cases when you let a company know that the SEC has comments on their disclosure they do not go forward until those comments are resolved.”
Hertz alerted sale participants in a June 11 filing “the common stock could ultimately be worthless” if the firm goes bankrupt, as bondholders and other creditors are first in line to see their cash returned. Selling stock at such a precarious condition is highly irregular.
Shares halted at $US1.95, down just 0.1% from Tuesday’s close. Hertz stock jumped as much as 21% earlier in the day before the pause.
Clayton noted Hertz was aware of the agency’s issues, but couldn’t specify if the firm aimed to continue with the sale before addressing the concerns. The SEC’s cautionary statement is relatively normal and doesn’t require Hertz to cancel its sale.
Hertz shareholders could also see their holdings turn worthless due to the New York Stock Exchange. The company received a delisting notice on May 26, just four days after announcing its bankruptcy filing. Hertz appealed the notice and shares will continue to trade publicly pending a hearing with the NYSE.
“There can be no assurance … whether there will be equity value in the Company’s common stock” should it be delisted, Hertz warned in a regulatory filing.
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