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Hertz files for a new IPO

By Chris Isidore, CNN Business

Hertz is going public again.

The rental car company, which filed for bankruptcy early in the pandemic and emerged on June 30, has filed paperwork with the Securities and Exchange Commission for an initial public offering.

The company signaled its plans for the IPO in August when it reported second quarter financial results, including revenue that was nearly back to pre-pandemic levels and an operating profit stronger than before the pandemic. It also had a net loss of $168 million brought about by $633 million of reorganization expenses.

The company is benefiting from a shortage of rental cars that is boosting rates incredibly high by historical standards.

When the pandemic brought air travel to a near halt, rental car companies had far more cars on hand than they needed, so much so that they were forced to rent space in the parking lots of deserted sports stadiums to park their fleets. With so few people traveling, the companies sold cars into the used car market to raise the cash they needed to survive.

Once demand for travel began to return, automakers suddenly were hit by the computer chip shortage, which limited the number of new cars they could make. Rental car companies were unable to replenish their fleets — a supply chain nightmare that sent rental rates soaring to record levels.

Rental car rates have retreated 15% from the record high they hit in June, according to the US consumer price index, the nation’s key measure of inflation. But the rates were still 51% higher in September than in September 2019, before the pandemic, according to CPI. Few products or services are still that much above pre-pandemic levels.

Hertz’s previous shareholders were pretty well wiped out by the bankruptcy. Financier Carl Icahn, its largest shareholder, lost about $2 billion on his investment when he sold his stock soon after the bankruptcy filing.

In short order, however, Hertz became hot with many retail investors, making it an early meme stock, a GameStop before shares of video game retailer GameStop enjoyed its own roller coaster ride.

That rise in Hertz’s shares prompted the company to propose selling additional shares to raise cash as it struggled to ride out the downturn and fund its operations during the pandemic.

Those plans were scrapped when the Securities and Exchange Commission objected, citing the likelihood that shareholders would be left with valueless stock at the conclusion of the bankruptcy process.

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