Let's think in first principles here, shall we? Stocks (or equity) is a fractional stake in current and future earnings of the company. We know if a company declares bankruptcy, its liabilities have exceeded assets and equity is down to zero or negative. Debt holders have higher priority stake in the company, so the first thing that happens in ~100% bankruptcy filings is debt holders take ownership of all assets. Current equity is almost always wiped out. After restructuring, debt holders may issue new equity, which may be worth something - but is completely different from what is currently circulating right now. No matter how you look at it, Hertz stock currently is worth zero. When street price of an asset is higher than its intrinsic value - that's literally the definition of a bubble. One can easily make money trading a bubble asset, but should not conflate returns here with asset's ability to generate future income.

> No matter how you look at it, Hertz stock currently is worth zero. When street price of an asset is higher than its intrinsic value

The only intrinsic monetary value of a thing is what someone else will give you for it (or what people give you for owning it, like a dividend or rent or whatever.) It doesn't matter why they'll give you that for it, only that they will.

Otherwise how do you explain the value of for example a fine art painting? What do you think their ordained true intrinsic value is? Are all paintings permanently in a bubble?

What are Hertz stocks worth? About 2.83, because that's what I can sell them for.

If you owned a hundred thousand Hertz stocks right now would you just throw the certificate away because they're worthless?

There are a lot of different definitions of intrinsic value. But it often has nothing to do with how much someone will give you.

There is the asset, an estimation of what the asset is truly valued at (intrinsic), and then finally the market price. In the case of the painting, the intrinsic value might be a function of a study of trends in demands of paintings, the artist, etc. The market price may or may not correctly factor in that information to price the painting well.

The fact that insider information does exist should paint a clear picture of why someones calculation of intrinsic value might be different from the market price.

Lastly, if someone gave me Hertz stock, I'd sell it ASAP and invest the money in something else.

https://en.wikipedia.org/wiki/Intrinsic_value_(finance)

> Otherwise how do you explain the value of for example a fine art painting? What do you think their ordained true intrinsic value is? Are all paintings permanently in a bubble?

I think the answer is yes.

Does that say more about fine art, or about the definition of a bubble?

Matt Levine: "This is also a model for Hertz, etc.: Famously, the stock of a company is a call option on the company’s assets, with a strike price of the nominal value of the company’s debt. When the company is bankrupt, the call option is out-of-the-money, cheap and highly speculative. That is, it feels more like a call option; if you are trading for fun, and call options are fun, then you will prefer option-y stocks like Hertz."

Bankruptcy does not always mean the liabilities exceed their assets. Specifically with chapter 11 bankruptcies it is usually a liquidity issue, not that they have an overall negative value.

By that logic Bitcoin should be worth zero, right?

I love it when people start explaining why, in this case, the price is wrong.

Exactly: so much for “the fair price is what the market says”.

But then: IN THIS CASE, we know better.