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Shares of Hertz Global Holdings Inc. more than doubled on heavy volume Wednesday, but retraced only a fraction of what they lost after the car rental company declared bankruptcy ahead of the long weekend.
The stock HTZ, +136.03% shot up 136.0% to close at $1.31. Trading volume topped 337.7 million shares, enough to make the stock the most actively traded on U.S. exchanges.
On Tuesday, the stock had plummeted 80.5% to 56 cents, the lowest close since going public in November 2006, on volume of 143.6 million shares. The struggling company had filed for bankruptcy protection after Friday’s closing bell.
Before the bankruptcy filing, the stock closed at $2.84 on Friday. So despite Wednesday’s large percentage gain, the stock recovered just 32.9% of what it lost on Tuesday.
The bankruptcy marked the exclamation point on a tumultuous couple of weeks for Hertz, which included an agreement with lenders for a grace period after missing lease payments, a “going concern” warning following a disappointing earnings report, a management shake up and reports that a bankruptcy was imminent.
Wednesday’s stock rally comes despite more bad publicity for Hertz and bad news for the broader rental car sector.
On Tuesday, Hertz disclosed that it paid out a total of $16.2 million in cash bonuses to “key employees at the director level and above” to persuade them to remain with the company despite the uncertainty resulting from the COVID-19 pandemic, and the bankruptcy filing. That follows the company restoring the salaries of key executives earlier this month, citing the heavy workload required to try to keep the company afloat.
And on Wednesday, a second big rental car company, Advantage Rent a Car, filed for bankruptcy.
Nick Shields, senior analyst at research services company Third Bridge, said the rental car industry is facing “peak uncertainty” with very limited options to determine their fate, as travel is slow to resume from the COVID-19-related shutdowns and as residual vehicle values decline, which brings the value of collateral down relative to the value of the companies’ loans.
“With rental companies normally highly dependent on airport travelers, and planes grounded, the industry is bound to suffer tremendously,” Shields said. “[T]here are worries that a large number of vehicles could flood the market and push residual values down further.”
That didn’t seem to scare off Avis Budget Group Inc. CAR, +18.05% investors. The stock surged 18.1% on Wednesday, and has now rocketed 60.2% amid a 5-day win streak.
The stock has still lost 32.1% over the past three months, while the S&P 500 index SPX, +1.48% has gained 2.8%.
