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An Investment Idea So Good It 'Hertz'

May 04, 2021 10:00 AM ETHertz Global Holdings, Inc. (HTZ)CAR147 Comments
Green Knight profile picture
Green Knight


  • Bid worth 61c already on the table so the downside is limited.
  • Alternative bid worth $4.30 just needs financing so that is the most likely outcome.
  • Auction May 10th could have unlimited upside including the stockholders retaining 100% of the stock.
  • Rental car prices and utilization are skyrocketing so future prospects are very bright and will likely encourage bidders.
  • When compared to Avis, Hertz could be worth $22 per share at the same multiple - only the bankruptcy process is holding it back.

Orange Dodge Challenger parked near Hertz rental office
Photo by anouchka/iStock Unreleased via Getty Images

Company Overview

Hertz Global Holdings, Inc. (HTZGQ) ("Hertz", "the Debtor" or "the Company") is an international car rental and leasing company. Hertz declared bankruptcy in May of 2020 and now two different groups

This article was written by

Green Knight profile picture
I am a distressed, event-driven, special situations, deep value, long/short fund manager with investments across the capital structure.

Analyst’s Disclosure: I am/we are long HTZGQ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (147)

Nizahe profile picture
06 Apr. 2022
Mann back when u posted this I kinda believed in u lol so I think a couple days or maybe week later I bought it and shortly after sold for about 100% gain thank u for that lol
OverTheHorizon profile picture
Why is Avis (CAR) $72 and HTZZ $16?:

kbaba profile picture
@OverTheHorizon It's pretty unclear what the float of HTZZ is but if it's 471 million shares as some report, then Hertz has twice the market cap of AVIS
OverTheHorizon profile picture
@kbaba Thx Kabob. Might explain why it keeps going down. Betting they’ll take steps to resolve.
Steve Moore profile picture
Barron’s said the warrants seem to be undervalued compared with the stock.

I still say I think the warrants will likely continue to go down in price. The issue IMHO is that warrants are an oddball security. Most people have never owned warrants and don’t really understand them. That includes most brokers. So if you call your broker or financial advisor and get an explanation that doesn’t sound quite right, you might be inclined to sell. Some people are likely waiting for their accountants to answer their tax questions before they sell. I imagine volume for the warrants may actually drop sharply in the next few to several weeks as many will not want to hold onto the warrants.

Also, I’d be surprised if the Reddit crowd would pump up the warrants. Now the HTZZ stock? That’s a whole different matter.

I realize the warrants can be sold at anytime, but that 30-year expiration is a bit strange. After all, many of us will be dead before the warrants expire!
IntelligentConsensus profile picture
@Steve Moore I hope you are right because then I can exercise the warrant (instead of selling it) with my broker and capture the discount, buy more, and do it over and over again. And / or I could short the stock against it (when/if that becomes possible). Free money.

From Investopedia:

“How to Sell or Exercise a Warrant

A warrant holder may choose to exercise the warrant if the current stock price is above the strike price of the warrant. Alternatively, the warrant holder could sell their warrants, as warrants can be traded similar to options.

If the current stock price is below the strike price, it makes little sense to exercise the option, since it is cheaper to buy the stock on the stock market. For example, if the strike of the warrant is $40, and the stock is currently trading at $30, it is not prudent to exercise the right to buy the stock at $40 when it can be purchased at $30.

On the other hand, if the stock is trading at $50, and the strike of the warrant is $40, it is beneficial to exercise the warrant. That said, just because the current stock price is above the strike price doesn't mean the warrant has to be exercised. If there is still lots of time until the warrant expires, holding onto the warrants may prove even more profitable.”
kbaba profile picture
@Steve Moore Understand that if the warrants trade at lower than $13.80 than the stock, that arbitrage traders will jump in and buy the warrants, exercise them and sell the stock. They can't fall that much. When Hertz gets on Nasdaq, it will be even more visible and there will be a greater time value. Both securities should rise together, Would you rather have your $9 security go up $1 or your 22$ security go up a dollar? I sold my shares and bought warrants with them
kbaba profile picture
Good press from car and driver

IntelligentConsensus profile picture
Looks like a nice arb between the warrants and the where the stock is trading. Stock price minus the 13.80 strike should equal price of the warrants. I guess because retail investors got more warrants than stocks, they are dumping them without regard to their actual value. Meanwhile, the institutional investors are sitting on their locked up shares they received from the rights offering. The spread looks quite large! Assuming get the timing right. Unless I’m getting my math wrong, which happens now and then :)
kbaba profile picture
" Stock price minus the 13.80 strike should equal price of the warrants. "

No, the warrants should have a time value, which during the froth now might get lost a bit but both securities should rise and fall pretty much together so $1 raise in price is almost twice as good for the warrants at these prices
Steve Moore profile picture
Per Marketwatch, the new trading symbol for Hertz common stock will be HTZZ.

There is a potential issue here for those who want to trade tomorrow morning. That is, your broker’s website likely won’t recognize the symbol HTZZ right away.

If you still want to trade, you will likely have to place your trade over the phone with a live broker- who may have to look up a few things before placing the trade. As of right now Schwab doesn’t yet recognize the new HTZZ symbol. And HTZGQ is likely done completely (no more trades).

So, if you are in a hurry tomorrow morning, please be patient. For the warrants I have no idea what the symbol will be. If anyone else can chime in with that info, it would be much appreciated.
kbaba profile picture
@Steve Moore Good public service post
@Steve Moore Warrants will trade under HTZZW
Steve Moore profile picture
@Cigar Butt Thx for that!
Stock headed to our prior prediction of over $10 assuming you stayed with the warrants package. We now think on an Avis type valuation, the package of cash, equity and warrants is worth over $12. Hertz will end up being better managed, and more valuable than Avis, under the new ownership and board in our opinion. If you were able to put up cash to subscribe to the rights, you’ll do even better.
No one here is a QIB and no person ever can be so rights were never an option
RogerBanks profile picture
@BKbiobull Incorrect it is QI not QIB. I am QI and have my docs in and accepted for the rights offering.
@RogerBanks i misread then, thought said QIB of which no person can ever be.
Steve Moore profile picture
Is it true that one warrant will allow a shareholder to buy one share of stock at a price to be determined?

Any word on the symbol for the new stock- maybe it will be HTZ like it was before?
Steve Moore profile picture
Let’s say you buy HTZGQ on 6/29 and the new Hertz begins trading on 6/30.

It seems like it would be virtually impossible for brokerage firms to convert the old stock to $1.53/share cash + new stock + warrants overnight.

That said, what is the deadline for indicating your intent to convert from old stock to new stock? What happens to those who don’t communicate to their brokers that they want to convert? Do they lose everything when HTZGQ stops trading?
RogerBanks profile picture
@Steve Moore If you own it it will convert. the old stock will be wiped away you will get ur cash, small position in new stock and warrants (options) to buy stock in new company. the warrnats will trade on their own so you can sell them to generate cash without exercising them. and yes they do convert it over night just like in a stock split or other corporate transaction
RogerBanks profile picture
@Steve Moore its too late, I believe, to subscribe to rights offering
@Steve Moore that’s why it takes the broker awhile to allow you to trade it after it converts. They gotta figure all that out.
The court approved plan says "The New Warrants may be exercised by the holders on a cashless basis." Does that mean if the strike price is say $10 then you can exercise the warrant and get the stock without paying the $10? That would seem to mean the warrant needs to trade for the stock price plus some premium for the 30 year option to exercise, right?
kbaba profile picture
@Cigar Butt " Does that mean if the strike price is say $10 then you can exercise the warrant and get the stock without paying the $10? " Whatever it means, it does not mean that.

The warrants will be tradable (most likely) on the exchange so folks can sell them without putting up the money to exercise
@Cigar Butt Warrant is another name for a long term stock option. I think the cashless basis exercise of warrant should be the same as a public company's employee conducts a cashless exercise of incentive options granted by the company as part of compensation package. If an employ was granted 1K option to buy his employer ABC's stock at $10 per share, and ABC stock is traded at $15 lately. In stead of spending $10000 of his own money to buy 1000 shares of ABC stock, then resale the stock immediately for $15,000. He can do an cashless basis exercise with the brokerage firm manages his company's stock option grant program. That is receiving $5,000 gain directly from that brokerage without doing exercise then resale by himself. So he gets $5000 without spending any his money. That is where the "cashless" comes from.

In your example, if warrant's strike price is at 10 and stock price is at $10 also, if a person does a cashless exercise, that means he exercises the warrant and receives nothing in exchange although he doesn't spend any money either. So it would not happen.

What is puzzled me that for a public company allow its employee do cashless stock option exercise, it usually dedicates ONE brokerage managing its stock option grant program. This brokerage will handle everything from granting option to bookkeeping option. In case of Hertz, the warrants will be issued to current stockholders and they will be in all brokerages you can imagine. Which brokerage will handle the cashless exercise. Will Hertz allow all brokerages have warrants for their client behave to handle cashless warrant exercise? How is that going to work?
@nowheel Thanks. Interesting idea. Guess we don't have to wait that much longer to see what it means. Good luck.
Steve Moore profile picture
Will the warrants be available to trade right away or will there be a minimum holding period for these 30-year items?

Also, will the warrants and/or the stock be traded on a “when issued” basis?

Thanks to anyone who can help. I saw a 297-page legal document but wasn’t about to read it.
kbaba profile picture
@Steve Moore no holding period, tradable asap
Considering the details in the bankruptcy exit plan, what is the best course forward for current shareholders of HTZGQ: hold shares of HTZGQ or sell prior to the end of June? Would holding shares offer the greater opportunity for gain longer term? What will be a fair price for Hertz post bankruptcy?
kbaba profile picture
@wwalters_29 Selling now or before BK exit gives you a sure thing. Holding through the BK transformation is a gamble. The downside may be losing a $2-3 bucks a shares but the upside could be far far more. The whole thing is confusing enough though that assuring answers are hard to obtain so we're left asking questions with confusing answers
IntelligentConsensus profile picture
@kbaba How are you calculating the 2-3 downside? The possibility of the shares post-bk trading down a bit from the $10 rights offering for some unforeseen reason?
kbaba profile picture
@IntelligentConsensus More like general uncertainty and market risk, not super clear on the quantity and strike price of the warrants. The stock is trading near the upper end of what the company estimated the deal was worth, 2-3$ represents the lower end of those estimates
No where does it say existing shareholders end up with 100% of company. Cash plus 3% plus 18% warrants
RogerBanks profile picture
@BKbiobull pro rata portion of 3% of the total Reorganized Hertz Parent
Common Shares, subject to dilution as described in the Plan
plus the cash
plus the warrants or rights offering participation
kbaba profile picture
Found this online regarding Hertz option adjustments (google search linked directly to a PDF) Folks had been asking about this, how options will settle and when

Contract Adjustment
Date: Effective on the business day the Plan becomes effective.
Option Symbol: HTZGQ changes to HTZQ1
Strike Divisor: 1
Contract Multiplier: 1
New Multiplier: 100 (e.g., a premium of 1.50 yields $150; a strike of 1 yields $100.00)
New Deliverable
Per Contract: 1) $153.00 Cash ($1.53 x 100)
2) 100 x pro rata portion of 3% of the total Reorganized Hertz Parent
Common Shares, subject to dilution as described in the Plan
3) 100 x pro rata portion of New Warrants
CUSIPs: Reorganized Hertz Parent: TBD
New Warrants: TBD
Settlement Allocation: Reorganized Hertz Parent: TBD
New Warrants: TBD


Delayed Settlement
OCC will delay settlement of the share and warrant components of the HTZQ1 deliverable until the final
distribution ratios and trading status are determined. Upon determination of the distribution ratios and trading
status, OCC will require Put exercisers and Call assignees to deliver the appropriate number of shares and
warrants. The cash component of the HTZQ1 deliverable will be settled by the OCC.
RogerBanks profile picture
@kbaba Be interesting to see what the open interest is in the options and what percent of those are short. In the world on short squeezes if u were long a sizeable amount u could buy the warrants, then exercise ur options and drive a squeeze in the warrants
kbaba profile picture
@RogerBanks Not sure the order of things you suggest. Those short the ITM call options (me) will get charged the cash and find themselves short the new shares and warrants) (i avoided that by purchasing balancing long position at $4.27) Those long now will get the warrants.
There could be something of a squeeze in the warrants just from those short shares or short warrants from options needing to cover depending on how warrants trade post BK
RogerBanks profile picture
@kbaba it's too late to open new positions but if u were long a bunch of calls even if they didn't expire till out months or yrs u could exercise all at once and force the sellers to deliver u warrants that could cause a squeeze in the warrants if they trade thin and since float likely not all that great.
Hey just out of curiosity, what happened to the
5.500% Unsecured Notes Claims ? why are they down?
The detailed analysis is fairly complicated. To keep it very simple, if you’re a big believer in the stock and have the cash today, you’re better off with the rights. If you’re not as big a believer in the upside of the stock story, and don’t want to or can’t lay out more cash today, you’re fine with the warrants. Either way, you’re probably better off taking either the rights or the warrants than selling your stock.
kbaba profile picture
Once again, does anyone have any insight on the value of the rights offering versus the warrants. I qualify for either. Also there's mention of an auction for rights that non-accredited shareholder can set a minimum bid for their right. How come there's so little info on this thing coming up in early june?
IntelligentConsensus profile picture
@kbaba today I received subscription documents to the rights offering from my broker, via email. We have until June 11 to make the decision. Approximately 1:1 for new shares, and have to pay 10 for each. It looks like if don’t subscribe, that forgone allocation doesn’t go to other shareholders/debt holders. I would think this uncertainty impacts shares outstanding, and therefore the value of the new shares and warrants and any increase in value on day one (for better or worse).
kbaba profile picture
@IntelligentConsensus Thanks for that. From reading the filing it looks like the rights offering is backstopped and what the common shareholders don't grab get offered to unsecured creditors, eligible for one share for every $17.xx of debt.

There is also an auction where shareholders can auction off their subscription rights that they aren't eligible to buy and set a minimum price but I've only seen the forms and information about the auction in the BK court filings at the link at the bottom

I'm totally confused at the value of the warrants versus the rights offering (and the rights shares will be locked against sale for 6 months) and also regarding the rights auction.

kbaba profile picture
@IntelligentConsensus I wonder if we really have that long to make the decision. There's a ton of paperwork and wire transfers that need to take place if you want to subscribe and some deadlines ahead of the June 11th date
kbaba profile picture
A few people have posted on boards that the rights offering is a better deal than the warrants. You have to choose which one you'll take but have to be basically a millionaire (accredited investor) to qualify for the rights.

I find the whole deal confusing and have no way of valuing the rights nor assessing their risk. They come with a bunch of demerits such as the need to put piles of new money in Hertz and the shares you get look like they'll be restricted such that you can't trade them soon. You'll have to jump through hoops to get those warrants and June 11th will be a deadline to deal with it

While the warrants don't require new money and will trade right away on the exchange when Hertz exits Bk.

So what are the numbers and terms that make the rights superior? From the 5/12 court filing, here is what the company says about the value of the warrant option

"The Plan Sponsors have estimated the value of the New Warrants using a Black-Scholes valuation
and a volatility range of 50-65%. Based on that analysis, the value of the New Warrants is
estimated at $730 million to $797 million. Using a midpoint volatility of 57.5%, the value of the
New Warrants is estimated at $769 million, which equates to $5.47 per share.
Using the Plan Sponsors’ proposed Plan Equity Value of $5.221 billion, which reflects synergistic
value from opportunities with Amex GBT and other Plan Sponsor portfolio companies, the value
of the New Warrants under this approach is estimated at $814 million to $885 million. Using a
midpoint volatility of 57.5%, the value of the New Warrants under this approach is estimated at
$855 million, which equates to $8.01 per share."
RogerBanks profile picture
@kbaba then there is a cash component also along with the warrant value?
kbaba profile picture
@RogerBanks You get $1.53 in cash per share plus some new equity in the restructured company (worth maybe 75 cents a share depending on how it trades)
Henrik Alex profile picture

Thanks for providing some details on the warrants. Apparently, you are not the only one being confused as the stock has given back a good chunk of the post-auction gains. Scaled into the shares this morning and are already sitting on a very nice profit.

As far as the warrants are concerned, it is not unusual that these trade well above their inherent value upon listing.
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