Fortunately, Hertz won’t be able to sell worthless shares in exchange for real money.
The financially – and apparently morally – bankrupt company ended its bid to sell up to $500 million in new shares that it acknowledged likely didn’t amount to much.
In a regulatory filing yesterday, the company said that the stock offering “promptly” became “suspended pending further understanding of the nature and timing of the Staff’s review.”
In the filing, Hertz said that it had been in “regular contact” with the Securities and Exchange Commission all week. This came after the agency told the company on Monday that it planned to review the stock sale.
SEC Chairman Jay Clayton said Wednesday that his agency had concerns about Hertz’s plan to sell stock while the company is in the middle of bankruptcy proceedings.
“In this particular situation we have let the company know that we have comments on their disclosure. In most cases when you let a company know that the SEC has comments on their disclosure they do not go forward until those comments are resolved,” Clayton said during an appearance on CNBC.
When companies want to sell a security, in this case more shares, they submit a filing with the SEC. The agency will review the filing. It will also send comments back to the company consistently. In its feedback, it will ask the company to improve the disclosure or any irregularities in the filing. During his CNBC appearance, Clayton did not specifically mention the issues the SEC had with the Hertz filing.
“We at the SEC, were are trying to carry out our responsibility in situations like this as best we can and I expect the other professionals around the situation to carry out their responsibilities as best they can,” Clayton added.
Those disclosures filed by Hertz said “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 to pre-COVID-19 or close to pre-COVID-19 levels.”
In plain talk, that means the new shares are worthless.
Hertz shares stopped trading for several hours yesterday before resuming again just before 3:30pm ET. Shares were up double-digits before closing the day with a modest 2.6% gain.
The company, which filed for bankruptcy on May 22, would traditionally get debtor-in-possession (DIP) financing. This would allow it to remain in business as the company went through bankruptcy proceedings.
However, after Hertz filed for bankruptcy, shares traded as low as $0.40 on May 26 before surging to as high as $6.25 on June 8.
Instead of taking the DIP loan that would need to be paid back, the company instead wanted to sell shares. I then planned to use the cash proceeds to pay off creditors. Hertz had hoped to sell up to $1 billion in shares, before trimming the proposed offering down to $500 million.
Tesla CEO Elon Musk Says Stock Price ‘Too High’ To Cap Bizarre Week
Tesla CEO Elon Musk capped an interesting week. He did so by tweeting out “Tesla stock price is too high imo (in my opinion)” Friday morning, and shares immediately fell 10%, wiping out nearly $15 billion in market cap in just a few hours.
It was the latest bizarre antic for Musk who earlier in the week cursed and called the stay-at-home order “fascism” during the Tesla earnings call, and followed that up the next day by interrupting a NASA conference call when a reporter asked NASA’s administrator about Musk’s COVID-19 comments. Musk had previously tweeted in early March “The coronavirus panic is dumb.”
Without being introduced on the call, Musk responded to the reporter “I think this is a different subject,” he said. “Wrong press conference, move on.”
Friday’s tweet about the Tesla share price came during a string of tweets on different topics and subjects. Some of those topics including lyrics to the Star-Spangled Banner. Others say he was selling all his physical possessions. Another say that his girlfriend is mad at him.
Musk started the week by tweeting “FREE AMERICA NOW” on Tuesday evening. Also, during Tesla’s earnings call on Wednesday, he said the shelter-in-place orders in California were “fascist” and that government officials should “give people back their (expletive) freedom.”
“The expansion of shelter-in-place, or as we call it, forcibly imprisoning people in their homes, against all their constitutional rights, is, in my opinion, breaking people’s freedoms in ways that are horrible and wrong, and not why people came to America and built this country,” Musk said. “What the (expletive)!”
He continued, “If somebody wants to stay in the house that’s great. They should be allowed to stay in the house and they should not be compelled to leave. But to say that they cannot leave their house and they will be arrested if they do… this is fascist. This is not democratic. This is not freedom. Give people back their (expletive) freedom.”
Thursday’s outburst during the NASA conference call was related to Musk’s tweets that seemed to downplay the severity of the coronavirus pandemic. A reporter asked NASA administrator Jim Bridenstine his thoughts on Musk’s COVID-19 comments. However, Musk, the founder of SpaceX, quickly interrupted to tell the reporter to “move on.”
Friday’s much more devastating Tweet-storm could get Musk into even more hot water with the Securities and Exchange Commission. As part of his 2018 settlement over the “taking Tesla private at $420” tweet, Musk agreed to have all his social media posts reviewed prior to publishing them.
When a Wall Street Journal reporter asked Musk if he was joking, or if he had the “Tesla stock is too high imo” tweet approved, Musk simply responded “No.”
Investors on both sides of the Tesla debate are waiting to see what action of any the SEC could bring against Musk for the tweet. Some believe the tweet was in clear violation of the 2018 settlement. Meanwhile, others say while uncommon, it’s not illegal for a company CEO to publicly discuss their company’s share price even if investors are harmed by the comments.
One thing is for sure, Musk continues to prove he’s the greatest showman alive.
Uber and Hyundai Are Planning to Offer Flying Taxi Rides by 2023
At CES 2020, Uber and Hyundai showed off a full-size mock-up of a flying taxi that both companies hope will be ferrying you above congested city streets by 2023.
The electric plane, called Uberdai, will carry a pilot and three passengers up to 60 miles, at speeds of up to 180mph, slashing journey times and helping get cars off the road. Eventually the craft will be automated, but for now the two companies are focusing on manned craft.
The flying taxi market is starting to get pretty lively. Last year, Boeing began test flights to test the safety of Boeing. Next, an electric aircraft with passenger pods designed to travel up to 50 miles, and Bell Helicopter unveiled the Bell Nexus, which the company hopes will “redefine air travel”.
The difference with Hyundai’s plane is its partnership with Uber, which is a name synonymous with ride-sharing throughout much of the world, and already has the infrastructure in place to offer flights as an option alongside trips by car, bike, scooter, helicopter and even submarine.
Ready for lift-off?
Uber has been aiming for the skies for several years now, teaming up with various aerospace companies to build a fleet of mini aircraft. At the Uber Elevate Summit in June 2019, it revealed a concept created in collaboration with Jaunt Air Mobility – a business that’s aiming to create a fully autonomous aircraft by the end of 2029.
This design was a cross between a helicopter and a plane, with a rotor to get it off the ground, and wings for gliding once airborne to conserve power.
“It’s called the compound aircraft, and what it’s doing is really trying to get the best of both worlds of hover and high-speed efficient flight,” Uber’s head of engineering Mark Moore said at the event.
Uber intends to launch its first swarm of flying cars in the US and Australia in 2023, with schemes planned for Dallas, Las Vegas and Melbourne. We’ll keep you updated as we learn more over the coming months.
Pump Prices to Edge up After Attack on Iranian General, but Long-Term Effect Unclear
Motorists soon will see the effects of President Donald Trump’s decision to kill a prominent Iranian general. Whether pump prices rise a little or a lot depends on how quickly international tensions intensify.
Florida gas prices climbed an average of 7 cents a gallon in the past three days and could increase an additional 5 cents, AAA – The Auto Club Group said Monday.
The 7-cent increase was coming even before the U.S. air strike Thursday that killed Iranian Maj. Gen. Qassem Soleimani. That hike was a result of a rise in the price of crude oil in December.
News of the targeted killing of Soleimani sent crude oil surging nearly $2 per barrel on Friday. An increase of that magnitude typically translates to a 5-cent hike at the pump, AAA said.
The U.S. benchmark for crude oil traded Monday just above $63 per barrel, the highest level since May 2019. The price of oil makes up about half the price of a gallon of gas.
“What happens in the Middle East can have a direct impact on Americans’ daily lives by influencing what they pay at the pump,” said AAA spokesman Mark Jenkins. “Crude prices rise when there’s a threat of war, because of concerns over how the conflict could hamper supply and demand.”
Oil analyst Tom Kloza of energy firm OPIS agreed that pump prices in Florida likely will rise about 5 cents a gallon in the coming days.
“Then I have a hunch that things are going to calm down,” Kloza said Monday. “I don’t think we’re looking at $3 gas.”
The national average pump price Sunday was $2.585, while the Florida average was $2.526, AAA said.
Kloza expects only modest increases in part because of the timing of the attack. January is always a slow month for gas consumption in the United States.
There’s also the reality that sanctions leave Iran unable to export oil. Complicating the calculus is Iraq’s response to the U.S. attack. The drone strike on Soleimani took place in Baghdad, and some Iraqi politicians considered the assault an affront to Iraqi sovereignty.
While there’s no Iranian oil supply to be disrupted by a war, Iraq is an important producer.
Trump keenly watches oil prices and realizes that a price spike might erode his support in this year’s presidential election, Kloza said.
At the same time, Kloza added, “This president has proven to be unpredictable.”
Trump’s response has been typically uneven. Delivering an official statement at the Mar-a-Lago Club in Palm Beach, Trump’s tone was measured. He said the targeted killing was designed to pre-empt Soleimani’s planned attacks on American diplomats and soldiers.
“We took action last night to stop a war,” Trump said Friday. “We did not take action to start a war.”
However, over the weekend, Trump took to Twitter to threaten attacks on Iranian cultural sites.
“The United States just spent Two Trillion Dollars on Military Equipment,” Trump wrote Sunday on Twitter. “We are the biggest and by far the BEST in the World! If Iran attacks an American Base, or any American, we will be sending some of that brand new beautiful equipment their way…and without hesitation!”
##IFRAME_1##Iran has vowed vengeance, but military experts say the nation isn’t powerful enough to wage a direct war against the U.S.
“It’s still far too early to know how much of an impact this conflict will have overall on prices at the pump,” AAA’s Jenkins said.
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