Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

bloomberg.com

Post reply on HN
Print view View original

211–220 of 326 posts

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

#211

Post by Lazare »

brandmeyer wrote: post #94
dwohnitmok wrote: post #85

Earlier quoted context omitted.

As usual, Matt Levine covered this pretty well in his newsletter: https://www.bloomberg.com/news/newsletters/2020-06-12/money-... The relevant quote: > Really I can’t decide how to feel about this. On first principles, you should not sell a billion dollars of stock in a bankrupt company to small retail investors who just installed Robinhood on their phones a few months ago. On the other hand, people are definitely do…

I like his argument. Its pretty reasonable in its principles. But it doesn't work in this situation. Hertz raised 10^7 dollars this way when they were 10^9 in the hole. Looks to me like the executives saw an opportunity to part some people from their money and took it. An outside investor is sharing shares they already have, or short-selling shares with the promise to buy them back later. That's wildly different from…

> That's wildly different from issuing new shares when you have inside information which prices them at zero.

Hertz executives were in possession of no such information. The information was very public.

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

#212

Post by bschne »

TaupeRanger wrote: post #190

"The original meme stock"? The term "pump and dump" is a classic phenomenon that is very common and has happened for decades...this is neither new nor particularly interesting as a specific case.

I thought „pump and dump“ refers to coordinated penny stock fraud whereas this was less of a coordinated scam and more the internet being the internet?

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

#213

Post by smnrchrds »

CydeWeys wrote: post #208
dragontamer wrote: post #180

Earlier quoted context omitted.

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.

> 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. That's entirely reasonable if you think that by keeping the company alive you can build it back up until the point that it's worth more than $5B. This is indeed what every CEO thinks -- that they can make the company worth more next year than it's worth thi…

Hertz is going through Chapter 11 bankruptcy. It is reorganization, not liquidation. At the end of it, there would still be a Hertz company, but with new owners.

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

#214

Post by dragontamer »

CydeWeys wrote: post #208
dragontamer wrote: post #180

Earlier quoted context omitted.

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.

> 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. That's entirely reasonable if you think that by keeping the company alive you can build it back up until the point that it's worth more than $5B. This is indeed what every CEO thinks -- that they can make the company worth more next year than it's worth thi…

Hertz agreed to bankruptcy, so that they don't have to pay all of their debts anymore.

That's... literally what's going on. As part of the bankruptcy proceedings, shareholders usually get wiped out. They wouldn't have pushed this button unless they believed that their bonds were hopelessly unpayable.

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

#215

Post by sbierwagen »

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…

>For example, you can't just disclose your way into arbitrary medical experiments on people.

Why not? If the person checks the "medical experiments" box in return for $100k, are we saying they shouldn't get the money? People willingly trade increased risk of death for increased pay all the time. Should it be illegal to be a lumberjack, or to work the overnight shift at a 7/11?

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

#216

Post by exporectomy »

jboog wrote: post #139
VHRanger wrote: post #3

Obviously? The company was bankrupt. People who bought HRTZ after bankruptcy had to have known it was a game of financial musical chairs, much like GME, TSLA or BTC.

If you read some of the posts on WSB a huge number of people just really have no clue about capital markets, investing, or basic business sense. I don't know how many times I saw people claiming GME would go to $1000 because the new CEO has a brilliant new scheme to turn the company around by going digital! Why "going digital" in 2021 means your company is worth 100X what it was a few months ago I'll never quite unde…

> Why "going digital" in 2021 means your company is worth 100X what it was a few months ago I'll never quite understand.

Understand it or not, it happened. Going from $3 to $300 in under a year.

Just because some people stated seemingly silly reasons for their predictions doesn't mean everyone betting on it is stupid. They may be trying to encourage others, have an intuition, hope to detect the peak and quickly sell, or even not care about money and be playing it as a game. But at the end of the day, whoever makes money is not the stupid one. Today GME is $250. Plenty of them can be getting rich now.

I have a thought that understanding how the stock market works doesn't matter much. Most of the knowledge from that is already bakes into share prices and the movements are pretty much random. So you very well could win by not knowing what a short is.

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

#217

Post by renewiltord »

lupire wrote: post #197
renewiltord wrote: post #185

Earlier quoted context omitted.

Listen, if you guys want to strict-law yourself so people can't talk to other people, I think that's fine. There should be rules that say people who have strict-lawed themselves should be protected from loose-laws and out-laws. And strict-laws can then interact with strict-laws. In fact, I'm even okay with defaulting to strict-laws and then one takes a test to allow being a loose-law who can interact with other loose…

"accredited investor" law is the "loose-law" you are talking about.

I'm an accredited investor and honestly, I'd be way wealthier today if I had just done the right thing and lied about being one a little earlier.

I wish the requirements were intelligence/knowledge-based rather than resource-based but I suppose the real test of intelligence was knowing that you can lie about being an accredited investor and no one can tell so I actually failed it.

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

#218

Post by ineedasername »

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…

Hertz explicitly stated that shareholders were highly likely to get absolutely nothing. I think it's also highly obvious to even retail investors that this is an incredibly risky bet with potential for a total loss. I don't think there's a strong argument here that buyers didn't know what they were getting in to.

Besides, how is this different than any other shareholder selling their stock, also knowing full well it is entirely likely to be worthless?

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

#220

Post by PeterisP »

fogof wrote: post #111
camjohnson26 wrote: post #39

Earlier quoted context omitted.

BTC’s version of bankrupt is when transaction fees aren’t worth enough to incentivize mining.

What do you mean by "not enough to incentivize mining"? Mining works on a system where the fewer miners there are the larger a portion of the total transaction fee share each miner gets. Even if the there were no exchanges or people sending transactions, I'm sure there would be at least a few nerds who would mine on their desktop computers for shits and giggles. A better criterion would be "when transaction fees aren…

There is a particular risk, unlikely but theoretically possible, that I'm thinking of here.

In case of a sudden huge decrease of BTC price for a whatever reason, the cost of electricity for mining would become much larger than the cost of all the expected reward (the newly mined part plus the txn fee part). If such a situation would cause major miners cease mining, then there's a gap where there's a lot of unprofitable [proof of] work too be done until the next hash difficulty adjustment, which happens every 2016 blocks - which usually should be roughly every two weeks, but if there's a large sudden hash rate decrease, then it can take months to mine those blocks, the adjustment won't happen until (unless!) someone sacrifices something like 100 million dollars in electricity costs to mine the remaining blocks while the difficulty rate has made it unprofitable at the unexpectedly lowered BTC price - and, of course, the impact of that hashrate drop would make BTC transactions very slow and act as a further downward push on BTC price.

TL;DR - there's a mechanism where a sudden large, rapid drop in BTC price might perhaps cause a sustained collapse of BTC price.

Post reply on HN