I don't think you understand bankruptcy. Hertz is about to receive a $17 Billion handout, in the form of its loans being largely forgiven and/or reorganized through a process called "Chapter 11 Bankruptcy".
As part of "forgiving the debt", the shareholders get the stock set to $0. This is virtually inevitable, it almost always happens.
---------
The only winners here, are the banks. The banks (and other bondholders) will collectively get $1 Billion more before the debt is forgiven. As such, this move only helps the banks and bondholders.
--------
The $1 Billion here is peanuts compared to the $17 Billion in loans that the Hertz company obviously cannot pay in its current form. The shareholders are wiped out without the secondary offering... the shareholders are wiped out with the secondary offering. In both cases, the company will inevitably go bankrupt... but the shareholders are collectively $1 Billion poorer after this offering.
----------
I cannot imagine how the shareholders benefit from this. In both situations, the shareholders are going to be left with $0 in just a few months.
Not exactly, the current shareholders are getting paid interest to loan out their shares to short sellers.
The longer this gets drawn out, the more interest they collect, and owners could come out ahead of the short-sellers. Even if the shares themselves go to $0 (as everything does in the long-run).
Or doing all that indirectly through options. If you know that the stock will still be worth 12 cents in 4 months, that can earn a fortune.
I don't believe Robinhood traders get this benefit. A premium service like Interactive Brokers provides the ability to lend shares. Sophisticated investors buying/selling and trying to make money through bankruptcy is fine.
The issue I have is that normal, retail investors, are going to be caught up in this game. Under traditional retailer strategy (ie: buy and hold, and/or dollar cost averaging), the retail investor is going to be wiped out here.
> Or doing all that indirectly through options. If you know that the stock will still be worth 12 cents in 4 months, that can earn a fortune.
You don't need to own any shares to buy or sell options. You can play the options market whenever you feel like.
And here I thought that the "wisdom of crowds" has been shown to be, on average, better estimators than "experts".
But then again, the guessers of the weight of an ox all want to be right. Dunno if that's what's happening with HTZ or not.
I'm not sure your assumption here is correct.
Its a well known fact that Robinhood traders are buying up the Hertz stock.
How many are holding $10 as a joke?
And even with the "Users Holding" metric, it's not even in the top 100: https://robinhood.com/collections/100-most-popular
edit: Hrmmm, they don't show it on that list, but it has 170k holders, putting it around the 55th most popular holding (by user count, not $!)
This is a stock which had far fewer than 5000 holders a few months ago, and now has 170,000 holders in Robinhood.
> How many are holding $10 as a joke?
Fewer than 165,000 people. While I'm up for allowing a certain level of stupid waste their own money... the number of buyers is beginning to make me worried.
You know that any stock that goes up and down by 500%ish in a few days is going to attract the attention of "dumb money". We all know where this is going.
Yeah, dumb money will do what dumb money does. A fool and their money are soon separated, etc. etc. The morality question we have to pose to ourselves however, is how "stupid" is "too stupid". Surely you draw a line somewhere?
The only part of my brain that agrees with you is the "Machiavellian" part. Yes, there's something to be said about letting people do what they wish to do. But on the other hand, if people start jumping off a cliff tomorrow, you bet that I'm going to do what I can to save them.
Buying up Hertz right now is extremely dangerous. Encouraging the behavior will cause lots of pain to the investors who almost certainly don't know what they're doing.
---------
These aren't hedge-funds or big banks who are "smarter" than me. These are retail investors. The "dumb money" of the market.
In the best case scenario, these "investors" (really... gamblers at this point...) are willing to play a Ponzi-like scheme of "selling to the greater fool". There's no other reason to be buying companies up through a bankruptcy.