The Hertz Story Isn’t What You Think

Re:The Hertz Story Isn’t What You Think by yborg on Monday June 01, 2020 @01:32PM (#23381190)

No, the article was calling out Carl Icahn for directing $57M last year to other companies he controls while being a minority owner of Hertz and the company obtaining $1.4B in new debt maturing no earlier than 2026 to service expiring debt. This is not being used to finance their working inventory except in the following sense "...it’s 500,000 cars act as collateral for $13 billion in financing — and when the collateral drops in value, the company has to make up the difference in cash." [1] The conventional model is leasing deals with the automakers that allow the rental company to sell back the cars at the end of the lease term, not try and dispose of them on the open market.

[1] https://nypost.com/2020/05/03/hertz-struggles-during-coronav...

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Re:The Hertz Story Isn’t What You Think by echelon on Monday June 01, 2020 @01:45PM (#23381342)

> Carl Icahn for directing $57M last year to other companies he controls while being a minority owner of Hertz

Is that legal? Could Carl Ichan be civilly or criminally liable? Potentially go to jail?

These debt sheet power moves by billionaires impact stockholders, including retirement and pension funds. When the companies they control go bankrupt, they materially harm the people who can't play at that level.

I don't know if this was wrong, but the outcome was certainly not good. It's high stakes gambling with other people's livelihoods.

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Re:The Hertz Story Isn’t What You Think by rrrrrrrrrrrryan on Monday June 01, 2020 @02:42PM (#23382102)

For others: it's legal, and it's basically all Icahn does - he's probably the most famous corporate raider. He obtains a minority stake in a company, gets a seat or two on the board, bullies the management into taking on tremendous amounts of debt, and uses the cash to pay himself and the other investors, calling it "unlocking value for shareholders." The once-healthy company is eventually sucked dry and he moves on to his next target.

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Re:The Hertz Story Isn’t What You Think by sangnoir on Tuesday June 02, 2020 @01:39AM (#23387852)

Timely Onion article: Protestors Criticized For Looting Businesses Without Forming Private Equity Firm First[1]

1. https://www.theonion.com/protestors-criticized-for-looting-b...

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Re:The Hertz Story Isn’t What You Think by cosmodisk on Monday June 01, 2020 @06:02PM (#23384501)

Corporate raiding was popular in 80s,but since then many methods were created to defend companies from such activities.For a minority shareholder to get a board seat is doable, however to bully the entire board into dancing, requires weak donkeys.If the CEO cares more about his own job than the company he's supposed to run,then it's quite easy for the like of Icahn to do whatever they want to. Having said that,I've got a feeling that he's mostly after vulnerable companies that can be influenced for one reason or another.

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Re:The Hertz Story Isn’t What You Think by oh_sigh on Monday June 01, 2020 @03:02PM (#23382339)

It doesn't really make sense to me who loans companies money in these circumstances. Aren't they the ones always left holding the bag?

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Re:The Hertz Story Isn’t What You Think by echelon on Monday June 01, 2020 @03:28PM (#23382657)

Yes and no. They're the first parties in line to pick apart bankrupt companies. The stockholders are the ones left out in the cold.

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Re:The Hertz Story Isn’t What You Think by oh_sigh on Monday June 01, 2020 @03:56PM (#23382987)

Same question then...when Icahn or others of his ilk get their claws into a board, why don't rational investors flee like the dickens?

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Re:The Hertz Story Isn’t What You Think by simonh on Monday June 01, 2020 @05:41PM (#23384275)

But Icahn is a stock holder too, just sell when he does. It seems like the debt lenders will just be left with a few stripped bones to chew on.

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Re:The Hertz Story Isn’t What You Think by Gibbon1 on Monday June 01, 2020 @06:43PM (#23384925)

Couple of things going on. There are a lot of institutional investors where fiduciaries have no skin in the game and are being corrupted via a soft bribery. Central banks have flooded the world with cheap capital. And you have system where stockholders that end up holding the bag (AKA you and your 401k) don't have voting rights.

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Re:The Hertz Story Isn’t What You Think by cryptica on Monday June 01, 2020 @07:45PM (#23385470)

Seems like a blatant conflict of interest and misappropriation of company funds.

He not only stole from the Hertz and from the bank, but he also stole from every US citizen because that credit was printed out of thin air by the bank when it was loaned to Hertz... The creation of this debt diluted the value of the dollar for every citizen of the US... Then that credit went to Icahn while he knew perfectly well that he was running this company straight into the ground.

This is definitely fraud.

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Re:The Hertz Story Isn’t What You Think by valuearb on Monday June 01, 2020 @03:39PM (#23382787)

It’s called fraudulent conveyance.

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Re:The Hertz Story Isn’t What You Think by verucanacl on Monday June 01, 2020 @10:18PM (#23386603)

you fool - icahn is a shareholder with mostly his own fortune

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Re:The Hertz Story Isn’t What You Think by itsoktocry on Monday June 01, 2020 @01:54PM (#23381493)

>Is that legal? Could Carl Ichan be civilly or criminally liable? Potentially go to jail?

Ichan is one the world's most famous financiers, rest assured he's got an army high paid lawyers poring over the fine print of these transactions. It's legal, but not ethical, or "right".

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Re:The Hertz Story Isn’t What You Think by elliekelly on Monday June 01, 2020 @02:31PM (#23381970)

Unless a matter is blatantly criminal the advice from the army of lawyers is usually just one of many factors taken into account when assessing the risk/reward. It's rare for management to ignore the advice of counsel completely but it's definitely not unusual for executives to have a higher risk tolerance than the attorneys.

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Re:The Hertz Story Isn’t What You Think by tchaffee on Monday June 01, 2020 @02:26PM (#23381909)

Those armies of high paid lawyers are not always right. Plenty of companies get it wrong and then pay the price in court.

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Re:The Hertz Story Isn’t What You Think by jmchuster on Monday June 01, 2020 @08:20PM (#23385705)

If the "downside" is paying fees in court, then it's a simple calculus for when it's worth it to follow the law and when not to. You're just doing business exchanges now with the legal system.

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Re:The Hertz Story Isn’t What You Think by baq on Monday June 01, 2020 @03:01PM (#23382327)

i guess the point isn't that they are right or wrong, it's what it takes to even decide that. high paid lawyers will need more high paid lawyers against them with zero guarantee of success.

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Re:The Hertz Story Isn’t What You Think by snowwrestler on Monday June 01, 2020 @03:54PM (#23382969)

IMO, you can't really blame a minority shareholder for what a business does. By definition, a minority shareholder does not have the power to force a business to do anything; Icahn works primarily by influence.

If the corporate leadership is weak, incompetent, scared, or any other pejorative you want to dredge up, then Icahn might convince them to make some bad decisions that benefit him.

Apple is an example of a company that Icahn when into full speed, and didn't really change that much. In the end, Icahn sold his Apple stock for a gain, but Apple leadership obviously made their own good decisions despite him. In fact he would have made a lot more money on Apple if he had held his stock for longer.

But "buy and hold" is not how he has fun, and that's what all this stuff is about. Carl Icahn does not need any more money. He likes doing what he does for the same reason Lebron James still likes playing basketball.

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Re:The Hertz Story Isn’t What You Think by zelon88 on Monday June 01, 2020 @02:04PM (#23381639)

The shareholders that matter are all on the same team. There's no way other shareholders would have let Icahn direct $57m from their collective pocket to his own 3rd party businesses unless they were getting a cut.

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