Do I think they will? No, I don’t.
However, as long as someone isn’t betting their life savings on this I don’t see or take any issue with it.
...
Thai Gaon, a 23-year-old salesman in San Francisco, bought 35,000 Hertz shares on June 4 at $1.43, spending a little over $50,000, according to documents viewed by The Wall Street Journal.
“It was my entire life savings,” he said. “I decided, you know, if I’m gonna do it, I should do it big, and I’ll make a play and see what comes out of it.”
https://www.bloomberg.com/opinion/articles/2020-06-12/if-you...
Maybe a rule should exist for such edge cases to protect unsophisticated investors in a country not known for financial literacy?
But it also doesn't mean we can't put barriers on those bridges that prevent people from jumping off. A rule preventing a company from selling stock when it's pursuing a bankruptcy would be just such a barrier.
Because some people are incompetent at judging risks, and offerings like these seem primarily designed to take advantage of those people.
1. These risks aren't reasonable.
2. It's practically simpler to ban this kind of weird and sketchy offering entirely than to implement some kind of control to limit the impact of what people can lose on a particular investment.
2. It's marginally simpler but enormously restrictive. If I want to invest $100 for a potential thousand-fold payout, why can't I? I can legally spend more for worse odds (and a worse payout) on any number of institutions (casinos, lottery, etc). When you say "sketchy and weird" you just mean "a different risk profile".
Why stop there? Why not let Ponzi schemes operate unimpeded? After all, if you pull your money out of the scheme early enough, you could profit handsomely. Why not let people take that risk?
>> when it's perfectly feasible to prohibit only high risk investments (i.e., those risks that would be financially ruinous i.e. put the investor on social support)?
> It's marginally simpler but enormously restrictive.
All right: please submit a notarized accounting of your income and assets, so that the bureaucracy can evaluate it and decide if it's acceptable for you make this investment. We'll get back to you in 6-8 weeks with the decision.
To be clear, you think Ponzi schemes are illegal because they are too risky?
> All right: please submit a notarized accounting of your income and assets, so that the bureaucracy can evaluate it and decide if it's acceptable for you make this investment. We'll get back to you in 6-8 weeks with the decision.
I don’t understand the snark. That’s less involved than getting a permit to remodel your kitchen and the government already has information about your wealth anyway.
Anyway, I don’t understand your argument: “it’s too easy to make risky investments and if you make it harder it would be too hard so we should prohibit it altogether”
Requiring a pilot license level of education for margin trading & gambling past a certain point (like $1k) is making more and more sense as time goes on.
He was in his 60's, been a rock in the community and nth generation in the family business.
I'm not in favor of loosening the rules on who can trade risky investment.
But the problem with this logic is that if you fuck up hard enough you effectively become a liability for society. You'll hit the safety net and tax dollar will be spent helping you recover. And that's a good thing in my opinion, but because of this we can't just watch people going "YOLO" and putting themselves in extremely precarious situations and say nothing.
If the guy ends up on food stamps, society will pay for those. It's therefore in society's best interest to prevent this insane risk taking.
Pull what off? The company is bankrupt, the equity will be wiped out, they literally say that in the filing:
"Although we cannot predict how our common stock will be treated under a plan, we expect that common stock holders would not receive a recovery through any plan unless the holders of more senior claims and interests, such as secured and unsecured indebtedness (which is currently trading at a significant discount), are paid in full, which would require a significant and rapid and currently unanticipated improvement in business conditions"
No one is "putting their nose to the grindstone" to save the company. The money is going to the creditors.
It will not go to $0. It will simply stop existing. You are free to trade it until then.
The hate is on the "investors" yes but I don't hate them. It is just that if they really thought auto rentals were going to rebound there are plenty of other opportunities out there that are currently not bankrupt. But hey, they aren't "99% off" like Hertz is.
It's a nearly guaranteed loss, and and pretty much the only people who will invest in it are those that are too incompetent to realize that. It smells like a legal con to separate those people from their money.
Much like people buy/sell crypto with zero analysis of fundamentals.
I don't think it's a bad decision for Hertz to offer up shares if it allows them to repay a greater percentage of their debt.
I think the real problem is that there are a lot of people who are speculating (gambling) in stocks like Hertz. This has been the case since online brokers came in to existence, and has only been magnified by the recent trends toward $0 fee commission trades pushed by Robinhood and the like.
If there is anything that I'd say needs to change, it would be apps like Robinhood should make detailed company information more easily accessible so people realize Hertz is going to $0 before gambling on a short term swing (which would mean making the UI/UX a bit more clunky + dense, so it probably won't happen)
Disclaimer: I'm basing this comment on rough memories of undetailed news coverage.
That said, the impression I got was that Hertz asked the bankruptcy court for permission to issue $1 billion of stock while needing ~$3 billion to pay off its creditors. This makes no sense to me. The right thing to do would be to try to sell $3 billion of stock. In that case, the path to non-failure is obvious. Here, failure isn't just the most likely option; it's also the plan.
(Would issuing so much new stock wipe out pre-bankruptcy stockholders? It might, but so does the bankruptcy.)
It’s a money grab. The second the stock is issued it’s basically worthless and Hertz knows it. But when these investors are inevitably screwed over they’ll basically have no recourse against Hertz so why not?
It's pretty obvious -- it's bullshit.
The only reason it's happening is that the regulators have been gelded and there is no reason not to. Adam Smith's invisible hand has been replaced by a dirty glove giving the public the finger.