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

#241

Post by camjohnson26 » Wed, Mar 10, 2021, 12:26 AM UTC

unethical_ban wrote: post #237

jboog wrote: post #148

Earlier quoted context omitted.

>"They're "fundamentals". Did I look at their balance sheet, no." Please for the love of god tell me you are trolling right now.

Not quite. I looked at a small piece of a picture, and the parent is accusing me of reading a reddit thread and going "ape strong, AMD to the moon".

What I didn’t say that. I said those are meme stock arguments, which they are. Surface level factors that may or may not matter but don’t give the whole picture of cash flow which is ultimately what matters.

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

#242

Post by mumblemumble » Wed, Mar 10, 2021, 12:35 AM UTC

ineedasername wrote: post #228

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.

Plenty of companies are valued at more than 5x their assets. Tesla for example is valued at more than 10x their assets. Besides, immorality doesn't really enter into it. The SEC requires public filings to ensure investors can make informed decisions. The rest is up to the investor who presumably would be betting that the company's prospects will increase, at least partly as a result of avoiding bankruptcy an having e…

The difference here is that the company was already in the middle of chapter 11. So there is no "avoiding bankruptcy", that part has already happened.

One common scenario for exiting chapter 11 is that you wipe out equity holders so that you can pay off your debts. (That's a major reason why stocks tend to get lower returns than bonds: less risk, less reward.) So, selling common stock like this in order to raise money is effectively robbing - or, more accurately, swindling - the poor to give to the rich, who tend to be the carriers of more senior debt. Which Hertz knew they were doing. Technically, they wrote, "We're selling you lots of $0 for the low low price of $2.50," in the prospectus, but they did that in the full knowledge that Robinhood users don't actually read prospectuses, and that Robinhood users were the only ones who would be buying these shares. So there's your deliberate deception.

The spot where they "buy some breathing room and recover" is the bit where you wipe out your equity holders in order to pay off your lenders as well as you can, restructure whatever remaining debt you have, and carry on. That's more-or-less what chapter 11 (as opposed to, say, chapter 7) is.

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

#243

Post by icedchai » Wed, Mar 10, 2021, 12:38 AM UTC

renewiltord wrote: post #217

lupire wrote: post #197

Earlier quoted context omitted.

"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.

I'm curious, what was your best investment as an accredited investor? (No need for a specific company, general info is fine.)

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

#244

Post by Dylan16807 » Wed, Mar 10, 2021, 12:39 AM UTC

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.

They said take a test. "Have a million dollars" is a grossly unfair replacement for that.

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

#245

Post by Dylan16807 » Wed, Mar 10, 2021, 12:58 AM UTC

marshmallow_12 wrote: post #192

brewdad wrote: post #110

Earlier quoted context omitted.

People were buying a lottery ticket. The difference in this case is that there were no jackpot winners.

To quote Mark Twain (or someone) "The lottery is a tax on people who are bad at math"

Presumably the math there is expected value, but does that even matter?

Imagine two lotteries that each sell ten million $1 tickets, and will only sell one ticket per person.

One has a jackpot of $7 million. The other has a jackpot of $15 million.

Math would tell you there's a significant difference between the two, wouldn't it?

But I would say the right answer is that the difference in payout doesn't matter. And you probably shouldn't buy either ticket.

Am I reading it wrong, is 'math' supposed to mean something else here?

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

#246

Post by jboog » Wed, Mar 10, 2021, 1:07 AM UTC

exporectomy wrote: post #216

jboog wrote: post #139

Earlier quoted context omitted.

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,…

That someone can get rich gambling is not some new insight!

Most of the WSB equity analyst is the equivalent of the blackjack player sure he's going to win it big because Mercury is in retrograde!

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

#247

Post by cwyers » Wed, Mar 10, 2021, 1:11 AM 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…

It was an at-the-market offering, and Hertz didn't know anything about its market value that wasn't already a matter of public record. Hertz stock was already being traded. I guess I don't understand the ethical system that says "everybody that holds Hertz stock should be able to benefit from an irrational enthusiasm for Hertz stock except for the issuer."

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

#248

Post by austhrow743 » Wed, Mar 10, 2021, 1:12 AM UTC

dragontamer wrote: post #188

HPsquared wrote: post #184

Earlier quoted context omitted.

The people buying the shares are making the "true" valuation of the company, being the ones buying it.

Do you think the buyers of HTZGQ at $5.50 in June 2020 will be proven correct? Or do you think, that like most other bankrupt companies, HTZGQ will be worthless once these bankruptcy proceedings are done? The stock is almost certainly going to go to $0. That's just what happens as bankruptcies play out. If you disagree, you're welcome to toss your money into buying some HTZGQ yourself. ---------- The issue is that He…

Why especially? Pointing out that the long term value of the stock is $0 while selling it is what makes it moral IMO.

If I sell my broken car while clearly noting that it’s broken, hat makes it ok, not worse than if I’d left it out.

Do you hold this view for sellers of hertz stock that aren’t hertz? What about sellers of stock that bought the stock post bankruptcy?

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

#249

Post by throwaway5752 » Wed, Mar 10, 2021, 1:19 AM UTC

cwhiz wrote: post #230

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…

What’s happening is that the masses now have access to do the same absurd gambling that the “experts” have been doing for a century. The only way out is to remove the gambling functions from the market. But then that would require that traders go get actual jobs, and produce actual value. I think these people would rather see the US burn than do that.

That's pretty cynical and optimistic at the same time.

Cynical because it doesn't acknowledge the value that a well functioning and regulated financial system can create. Efficient flow of capital only sounds bad if you haven't seen the absence of it, like projects failing for lack of funding while bad ones are burning money.

Optimistic for thinking that the masses have anything approaching the same level of access. I was hoping anyone with fintech experience could chime in disabuse others of this, but the masses don't have anything. It's depressing to watch so many people (on average) just destroying their savings while they're young and can make the biggest impact on their future savings.

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

#250

Post by ineedasername » Wed, Mar 10, 2021, 1:21 AM UTC

mumblemumble wrote: post #242

ineedasername wrote: post #228

Earlier quoted context omitted.

Plenty of companies are valued at more than 5x their assets. Tesla for example is valued at more than 10x their assets. Besides, immorality doesn't really enter into it. The SEC requires public filings to ensure investors can make informed decisions. The rest is up to the investor who presumably would be betting that the company's prospects will increase, at least partly as a result of avoiding bankruptcy an having e…

The difference here is that the company was already in the middle of chapter 11. So there is no "avoiding bankruptcy", that part has already happened. One common scenario for exiting chapter 11 is that you wipe out equity holders so that you can pay off your debts. (That's a major reason why stocks tend to get lower returns than bonds: less risk, less reward.) So, selling common stock like this in order to raise mone…

I was responding to a comment about a hypothetical, not this particular case. The hypothetical was a company with $4b in debt selling $5b in stock to remain operating. This is not only fine, it is common, especially for private companies where investors are betting on the future success of a company.

Even in bankruptcy, it is not uncommon for investors or banks to give the company bridge loans which the lenders knows full well might be lost if the restructuring doesn't work.

As for this case, it is not robbing shareholders. Chapter 11 is in not an automatic wipe out for shareholders, in fact you'll see other comments here about proposals for alternate plans for Hertz that would not wipe out shareholders. This is, if not common, certainly not unheard of: Restructuring a public corp and keeping it public post chapter 11 means it will still have stock on the market, and in some cases prior shareholders are able to exchanged their old shares for new ones.

It is also not robbing because even retail investors know full well what "bankruptcy" means and no reasonable person would buy this stock without realizing the significant risk for total loss. And in any case, how would Hertz selling stock, knowing the likely risk for a complete loss, be any different than some other institutional investor selling their stock, also knowing the buyer has an excellent chance for a complete loss?