Hertz, the original meme stock, is turning out to be worthless • Hacker News Board

Re: Hertz, the original meme stock, is turning out to be worthless

#171

Post by ksdale » Tue, Mar 09, 2021, 9:31 PM UTC

jboog wrote: post #141

ksdale wrote: post #63

Earlier quoted context omitted.

I think in regards to finance, the only thing that's under attack is the idea of "stock market as source of knowledge about value." But I'm not sure that the stock market has actually served that purpose for decades. IMO, it's good that people are beginning to see the stock market as a casino. If people want to "invest," they'll figure out more pro-social ways to do it than the stock market, and if they want to gambl…

Ben Graham said many decades ago that over the short term the market is like a voting machine but over the long term it's a weighing machine. There have always been periods of irrationality in the markets but there's no reason to believe that equities are fundamentally untethered from their inherent value in perpetuity. Eventually most of the overnight WSB stock picking geniuses are all going to lose their shirts and…

I like that Graham quote, and you make good points. I guess when I say "investing," I mean more like - Purchasing an equity entitles you to a share of that business' income and potentially assets, but if you buy the equity on the stock market, you're not actually investing in capacity, the way you would be if you bought an IPO or even just a piece of equipment you could use to make something.

And I think people have always given the stock market more credit than it's due as being "the economy," when really the stock market is a set of signals about the economy. The economy is the people and machines and the buildings that do stuff and make things, and the economy remains regardless of what's happening in the stock market.

If a bunch of silliness happens around a certain stock, or if the stock market becomes wildly detached from reality, it doesn't have anything to do with peoples' ability to produce value.

Re: Hertz, the original meme stock, is turning out to be worthless

#172

Post by rchaud » Tue, Mar 09, 2021, 9:31 PM UTC

ksdale wrote: post #63

throwaway5752 wrote: post #47

It's not worth discussing BTC, TSLA, GME, or HTZ. That is missing the forest for the trees. The degradation of even the appearance of an orderly market is the story. The money movement (volume of excess trades X magnitude of price change) seems out of reach of unleveraged retail. Faith in private and public institutions is justifiably poor, but also under organized attack. This is going to end badly for everyone, exc…

I think in regards to finance, the only thing that's under attack is the idea of "stock market as source of knowledge about value." But I'm not sure that the stock market has actually served that purpose for decades. IMO, it's good that people are beginning to see the stock market as a casino. If people want to "invest," they'll figure out more pro-social ways to do it than the stock market, and if they want to gambl…

> If people want to "invest," they'll figure out more pro-social ways to do it than the stock market,

Will they? Is there any such thing as a pro-social 401K or Roth IRA? If money is going from your paycheque into your retirement fund, bypassing you entirely, it adds significant friction to moving it out into something with more direct impact.

Re: Hertz, the original meme stock, is turning out to be worthless

#173

Post by ENOTTY » Tue, Mar 09, 2021, 9:33 PM UTC

I deliberately bought a share of Hertz during the craze. I knew it had filed for bankruptcy.

If Hertz was somehow rescued, I could make some money and have an interesting story. Maybe the shareholder meetings would be ridiculous parties with other crazy retail investors.

But even if existing shareholders would be wiped out, I wanted to see first hand what happens in this sort of situation. (So far I haven't received any paperwork.)

Re: Hertz, the original meme stock, is turning out to be worthless

#174

Post by dalbasal » Tue, Mar 09, 2021, 9:41 PM UTC

brandmeyer wrote: post #107

ISL wrote: post #98

Earlier quoted context omitted.

Zero shareholder value was the overwhelmingly likely outcome, but not completely certain. (If Hertz magically recovered from bankruptcy, however unlikely, the payoff might have been >1000%). The prospectus clearly stated that there was negligible likelihood of return. On the flip side, from the creditor's perspective: "We loaned you a bunch of money, you can't pay it back, and there are some people who would like to…

No. No! I reject this rationale. Just because its in the domain of finance and business doesn't make it ethical. For example, you can't just disclose your way into arbitrary medical experiments on people. Regardless of how you rationalize the principles, it will end up exploiting the most vulnerable citizens. While I readily admit that the law does not forbid all forms of unethical behavior, I do believe that it shou…

Is that the case here though?

I like your "disclose your way to arbitrary medical experiments" analogy. Things can't be just black and white. That said... who is buying Hertz stock during bankruptcy proceedings?

I don't see why this exploits vulnerable people in particular. As the op says, it's a real gamblers' trade.

Anyway, I think it's an insider-ish trading question. Selling stock once you already know the price to be zero is a step too far.

Re: Hertz, the original meme stock, is turning out to be worthless

#175

Post by tomjakubowski » Tue, Mar 09, 2021, 9:42 PM UTC

ENOTTY wrote: post #173

I deliberately bought a share of Hertz during the craze. I knew it had filed for bankruptcy. If Hertz was somehow rescued, I could make some money and have an interesting story. Maybe the shareholder meetings would be ridiculous parties with other crazy retail investors. But even if existing shareholders would be wiped out, I wanted to see first hand what happens in this sort of situation. (So far I haven't received…

I never understood how stock market options worked (calls, puts) so I've spent a few dozen dollars buying various stupid out of the money options and following them (and then, agonizing over when to sell!). This has made me understand "the Greeks" better than any textbook alone could have done.

Re: Hertz, the original meme stock, is turning out to be worthless

#176

Post by thaumasiotes » Tue, Mar 09, 2021, 9:43 PM UTC

dragontamer wrote: post #155

brandmeyer wrote: post #78

Hol' up. While in bankruptcy, some fools ran up the price of Hertz stock. Then, while the price was up in the middle of bankruptcy proceedings , Hertz sold some new shares to the same fools. The final result of the bankruptcy wiped out all of the shareholders. While the buyers were obviously fools, Hertz should have known that zero shareholder value was a likely outcome. How was selling more stock in that situation l…

> How was selling more stock in that situation legal? They asked the bankruptcy court, and the bankruptcy court's job is to maximize value for the bondholders. Turns out that selling worthless stock (for money) is really good for the bankruptcy proceedings (getting maybe 70% of the money back instead of 60%). Then the SEC came in (whose job is to protect retail investors), and the SEC told them to knock-it-off. Diffe…

What I don't understand is that Hertz specifically wanted to sell an amount of shares that wouldn't raise enough money to pay off their debts. Their prospectus noted that shares sold would automatically become worthless unless their debt was paid off, which they didn't anticipate.

But why not try? What if they sold so much stock that the bondholders could just be paid back? Why do the stock sale specifically planning for failure? Why include a limit that guarantees failure even if you would have otherwise succeeded?

Re: Hertz, the original meme stock, is turning out to be worthless

#177

Post by biolurker1 » Tue, Mar 09, 2021, 9:44 PM UTC

ENOTTY wrote: post #173

I deliberately bought a share of Hertz during the craze. I knew it had filed for bankruptcy. If Hertz was somehow rescued, I could make some money and have an interesting story. Maybe the shareholder meetings would be ridiculous parties with other crazy retail investors. But even if existing shareholders would be wiped out, I wanted to see first hand what happens in this sort of situation. (So far I haven't received…

Why would be curious about corporate bankruptcy procedures and spend time and money on it is beyond me but I'm sure that's not why the rest bought in.

Re: Hertz, the original meme stock, is turning out to be worthless

#178

Post by agumonkey » Tue, Mar 09, 2021, 9:44 PM UTC

sfjailbird wrote: post #137

agumonkey wrote: post #135

meanwhile GME is back to 200+

... and nary a headline. But we do get cautionary tales like the above. Sometimes I get the nagging feeling that the wallstreetbets conspiracy crowd might be on to something.

The medias are really not a critical piece of society these days.. it seems like more than half of it is just noise coverage.

Re: Hertz, the original meme stock, is turning out to be worthless

#179

Post by lucb1e » Tue, Mar 09, 2021, 9:47 PM UTC

ENOTTY wrote: post #173

I deliberately bought a share of Hertz during the craze. I knew it had filed for bankruptcy. If Hertz was somehow rescued, I could make some money and have an interesting story. Maybe the shareholder meetings would be ridiculous parties with other crazy retail investors. But even if existing shareholders would be wiped out, I wanted to see first hand what happens in this sort of situation. (So far I haven't received…

I'm involved in two cases: MtGox and Grupeer. Neither were publicly traded companies that went bankrupt, but they're insolvency cases in general. In the former I had some play money (by now the coins owed might be worth thousands, but back then it was pennies) and didn't spend time figuring this out properly, in the latter I have a few thousand euros and collectively we (~2500 people) got ourselves a law firm in the relevant jurisdiction. With MtGox, at some point some step on the website didn't work (I felt like I kept having to reiterate that, yes, I still want my coins back) and it seems I now lost my claim or something, I don't quit get it. With Grupeer, I notice that we're on top of every development, filing disputes where necessary, and while I still spent multiple evenings reading through documents and collecting my data for evidence, we've totally got this.

If you ever find yourself with money in a bankruptcy and it is worth more than the lawyer's fee, definitely get a lawyer involved. They know what to file, to whom, when to take which step. The trustee or administrator is not going to come knocking on your door with your dues just like that.

Re: Hertz, the original meme stock, is turning out to be worthless

#180

Post by dragontamer » Tue, Mar 09, 2021, 9:51 PM UTC

thaumasiotes wrote: post #176

dragontamer wrote: post #155

Earlier quoted context omitted.

> How was selling more stock in that situation legal? They asked the bankruptcy court, and the bankruptcy court's job is to maximize value for the bondholders. Turns out that selling worthless stock (for money) is really good for the bankruptcy proceedings (getting maybe 70% of the money back instead of 60%). Then the SEC came in (whose job is to protect retail investors), and the SEC told them to knock-it-off. Diffe…

What I don't understand is that Hertz specifically wanted to sell an amount of shares that wouldn't raise enough money to pay off their debts. Their prospectus noted that shares sold would automatically become worthless unless their debt was paid off , which they didn't anticipate. But why not try? What if they sold so much stock that the bondholders could just be paid back? Why do the stock sale specifically plannin…

Many would suggest that such an action you propose is fundamentally immoral.

Lets say a hypothetical company is overall $-4 Billion in debt (total assets - liabilities). You successfully raise $5 Billion from some means.

Now you're in a position where you sold $5 Billion worth of shares on a company that (by all fair evaluations) is only worth $1 Billion after the capital raise.