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So in this video today we’re going to be talking about hertz rental car stock it is a very popular stock that people are buying right now and we’re going to be talking about whether or not this stock is a buy trading at around two dollars per share now for those who are not familiar hertz is a massive rental car company with over 10,000 locations in the us and
International and you see a lot of these hertz rental locations at places like airports so due to the global pandemic in the shutdown of travel this severely hurt the business here for hertz rent-a-car and after being in business for 100 years hertz officially filed for bankruptcy in may of this year now surprisingly despite that fact investors are flocking towards
This stock and in particular it is those who are using some commission free trading apps that make it very easy to invest in the stock market now as of the bankruptcy filing hertz has around nineteen billion dollars in debts and they have over seven hundred thousand rental vehicles most of which are sitting idle right now but the thing is the issues that hertz was
Having are not just related to the pandemic this is simply the icing on the cake for them because they have been struggling over the last couple of years due to competition from ride-sharing apps like uber and lyft rather than people renting a car for their business trip or vacation a lot of people prefer to just use lyft or uber rather than having their own car and
It just saves them money or it’s just more convenient for them hertz has been losing money year after year and in 2019 they lost a total of 58 million dollars now the issue here guys is that if your business did not do well in 2019 which was overall a very prosperous year people were traveling business was good if you lost almost sixty million dollars in 2019 there’s
Something very wrong with your business model so then when you enter 2020 and there’s this global shutdown it just amplifies whatever was wrong with the business current now usually when a company files for bankruptcy the shares begin trading for pennies per share maybe 25 to 50 cents per share which is what we have seen with stocks like jcpenney and in the past
We saw this happen with sears which is currently trading for around 20 cents per share the shares are basically worthless because what happens is after that company files for bankruptcy if they do go under which is very likely all of the proceeds from selling assets are going to be used to pay off the bond holders and the debt investors and equity investors would
Only get money if there’s anything left over but in most cases the debts are larger than the assets so the stock becomes utterly worthless now in rare circumstances a company can actually exit bankruptcy if they are able to restructure their debts and have some kind of outside investor come in or if they were to merge with a different company so for example back
In 2011 american airlines filed for bankruptcy but they actually exited bankruptcy about two years later after merging with us airways so investors who bought american airlines stock during that bankruptcy filing made out very well because the old shares of the bankrupt company were exchanged for new shares of this merged company with us airways but it’s important
To understand that’s extremely rare and in most circumstances when a company declares bankruptcy the shares eventually become completely worthless and here’s where things get very interesting with hurt stock and also guys if you’re enjoying the video so far please go ahead and drop a like for the youtube algorithm it helps this video to be shared with more people
While hurt stock after filing for bankruptcy fell to a low of around 40 cents per share which is typical of what you see when a stock does file for bankruptcy however what happened here is after the stock hit 40 cents per share and went into a massive rally and climbed to a high close of five dollars and 53 cents per share and that is a percentage gain of 1200 82%
So a lot of people were wondering what the heck is going on why would shares of a bankrupt company climb over 1000% is there something that i am missing now before we get into why this happened i have a quick message here from today’s video sponsor which actually was used for the research for this video and that is morning brew i was really glad when they reached
Out and asked to sponsor a video on my channel since this is a service that i already use in the past in the mornings i used to spend my time doing the death scroll on my phone going through random social media apps and wasting time but eventually i decided to get a subscription to a couple of newspapers and i also subscribed to morning brew about one year ago
So now rather than wasting my time on social media i read the news and i get my updates very quick and easy from the morning brew newsletter essentially it’s all the important news related to politics stock market things like that and a quick easy to read 5-minute email that’s going to get you caught up on the things that you need to know with no additional fluff
And like i said i actually got some of the information for this video from morning brew because they covered what was going on with hurt stock related to the bankruptcy this newsletter helps me to stay on top of trends it helps me come up with good video ideas and it also helps me with making my investment related decisions if you guys want to check it out i highly
Recommend it it’s 100% free the link is down below all you have to do is subscribe and you’ll get those newsletters every single morning monday through saturday so click the link down below guys and subscribe to morning brew today alright so why did shares of bankrupt hurt stock surged over 1000% the answer here is average retail investors stepped in and started
Buying this stock like crazy now the reason behind this nobody really knows for sure but investors in particular small ones saw value in this bankrupt company and it’s crazy because this isn’t the only bankrupt company that saw a massive rally in their share price after filing for bankruptcy so essentially you have these investors who may not know what it is that
They are doing they don’t know what bankruptcy means and they see a well-known company like hertz trading for 40 cents a share or under $1 per share they don’t understand why that share price is so low maybe they don’t know what bankruptcy means and they began flocking towards this stock then as that price climbs higher and higher other people see it going up they
Fomo into it because they think it’s going to climb higher and they don’t want to miss out and that leads to a 1000% rally in a bankrupt company and the crazy thing is here guys this rally led to hertz attempting to issue new shares of this bankrupt company which would allow them to raise more money to pay off the debts that the company has now the good news is the
Securities and exchange commission blocked them from doing this the reason is not clear here but essentially it’s because this is totally unethical and would essentially be a way to legally scam investors so the sec blocked this from happening it’s never really been heard of before of a company issuing more shares during bankruptcy now like i said one of the most
Popular apps where people are buying hertz stock is the commission free trading app robin hood now nothing against robin hood here guys i use the app myself but the issue here is that since it’s commission free trading no minimum account balance literally pretty much anyone can get in and start investing and because the barriers to entry are so low there’s also
Not much educational requirements to get in there and start trading so people saw hurt stock and decided to buy it and there’s a site out there called robin track which tracks the activity on the commission free trading app robin hood and what they saw is that ninety six thousand new users opened positions in hertz stock the week that hertz filed for bankruptcy so
The question becomes is hurt stock a buy right now and just so you guys know this is simply my opinion this is not any kind of financial advice and you should always do your own due diligence before buying or selling the answer here guys is under no circumstances in any way shape or form would i ever personally consider investing in hertz stock right now i would
Never invest in a bankrupt company because odds are the shares are going to become worthless they sell all the assets they pay off all the deaths but most of the time the deaths are far larger than the assets so the equity investors get nothing buying into shares of a bankrupt company is like even worse than gambling i would rather go put my money on a blackjack
Table or play roulette rather than investing in a bankrupt company i don’t fully understand why people are buying hertz stock it may be a lack of information or people just for some reason think this stock is coming back but it doesn’t look good this was a flawed business model for the last couple of years and the pandemic that shut down travel was the final nail
In the coffin for a bad business that just doesn’t work anymore in 2020 and even hertz came out with a statement when they were looking to issue new shares basically saying they’re almost certain to become worthless hertz wrote that we expect common stockholders would not receive a recovery through any plan unless the holders of more senior claims and interests
Are paid in full essentially it’s almost a certain bet that shareholders would get nothing even those who would have bought the new shares if they were allowed to issue them i think the average retail investor doesn’t understand what bankruptcy means and unfortunately while these free trading apps have done a lot of good it has also allowed people to enter the
Market with no prior experience and no education and they may just have no idea what bankruptcy means they see a name like hertz they recognize it they see that it’s trading for $1 per share and they want to buy shares having no idea what is going on behind the scenes and the fact that hertz tried to issue new shares seems like a very sketchy move to me because
They pretty much knew those shares were almost certain to become worthless and it’s also worthwhile to mention that before stepping down last year during the year when this company lost fifty eight million dollars the former ceo took a salary of nine million dollars of which about three million dollars was cash even though the company was losing tens of millions
Of dollars that ceo also took a salary that year of almost 10 million i just don’t trust that i would never ever ever invest in this company and i would not recommend that anyone out there invests in bankrupt companies like hertz so anyways guys there you have it short answer no hurt stock is not a buy at $2 it’s not a buy at $0.50 i would not touch this stock in
Any circumstances let me know what you guys think down in the comment section below if anyone has this stock if you bought it for some reason i would love to hear why that is leave me a comment down below like i said guys if you want to check out that morning brew free newsletter that’s the top link in the description thanks so much for watching and i will see you in the next video
Transcribed from video
Is Hertz (HTZ) Stock A Buy At $2? Bankrupt Stock Surges 1,000%! By Ryan Scribner
