US Hertz, Swarmed by Ants, Temporarily Halts New Stock Issuance After Bankruptcy Protection Filing Amid SEC Concerns
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[Asia Economy Reporter Jeong Hyunjin] U.S. rental car company Hertz announced an unusual plan to raise capital through new stock issuance after filing for bankruptcy protection, but decided to suspend the plan on the 17th (local time), just two days later, as the U.S. Securities and Exchange Commission (SEC) began reviewing it.
According to Bloomberg and other sources, Hertz stated in documents submitted to financial authorities on the day that it would "immediately suspend the new stock issuance plan to gain a better understanding of the nature of the SEC's review." Hertz had received approval from the bankruptcy court in Delaware on the 12th for a new stock issuance plan worth up to $1 billion (approximately 1.2 trillion KRW), and three days later, on the 15th, announced plans to issue $500 million worth of common stock.
Hertz explained that SEC staff informed them earlier this week that they would review this process. SEC Chairman Jay Clayton also appeared on CNBC before Hertz’s announcement to suspend the new stock issuance and stated, "There are issues related to Hertz’s new stock issuance plan."
The Wall Street Journal (WSJ) explained that when the SEC raises questions and conducts a review regarding new stock issuance, it is customary for the company to suspend the procedure. In particular, Hertz is currently under bankruptcy protection, and the common stock planned to be issued in this process could potentially lose all its value.
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After filing for bankruptcy protection on the 22nd of last month, Hertz’s stock price plummeted to $0.40 per share on the 26th of the same month. However, individual investors quickly bought Hertz shares aiming for a sharp price increase, causing the stock price to surge to as high as $6. On the day, Hertz’s stock closed at $2.00, up 2.56% from the previous day.
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