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

#101

Post by dehrmann » Tue, Mar 09, 2021, 5:35 PM UTC

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 should have known that zero shareholder value was a likely outcome. How was selling more stock in that situation legal?

This disclosure helps:

https://www.sec.gov/Archives/edgar/data/1657853/000110465920...

Since it went before the bankruptcy judge, they might have been obligated to bondholders to sell more shares.

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

#102

Post by foerbert » Tue, Mar 09, 2021, 5:35 PM UTC

lotsofpulp wrote: post #95

brandmeyer wrote: post #94

Earlier quoted context omitted.

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…

> Looks to me like the executives saw an opportunity to part some people from their money and took it. AKA business. > That's wildly different from issuing new shares when you have inside information which prices them at zero. That’s wildly different from Hertz’s bankruptcy being public information. If people want to gamble on unlikely outcomes, that’s their business.

That description also fits straight up robbery. I don't think it's a particularly meaningful statement in this situation.

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

#103

Post by lotsofpulp » Tue, Mar 09, 2021, 5:40 PM UTC

ISL wrote: post #98

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…

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…

Even that exchange is not analogous, since Hertz told everyone what they were selling is worthless.

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

#104

Post by lotsofpulp » Tue, Mar 09, 2021, 5:41 PM UTC

foerbert wrote: post #102

lotsofpulp wrote: post #95

Earlier quoted context omitted.

> Looks to me like the executives saw an opportunity to part some people from their money and took it. AKA business. > That's wildly different from issuing new shares when you have inside information which prices them at zero. That’s wildly different from Hertz’s bankruptcy being public information. If people want to gamble on unlikely outcomes, that’s their business.

That description also fits straight up robbery. I don't think it's a particularly meaningful statement in this situation.

Yes, that’s my point. It’s a meaningless statement in a discussion about fully informed buyers and sellers engaging in voluntary transactions.

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

#105

Post by philihp » Tue, Mar 09, 2021, 5:41 PM UTC

Judgmentality wrote: post #42

camjohnson26 wrote: post #35

Earlier quoted context omitted.

All this retail interest in meme stocks is gambling, plain and simple. More people entering the market creates a Ponzi effect where new entrants pay for the gains of holders, but by definition this is unsustainable. You can see this basically everywhere in the economy but the meme stocks are the most obvious. Not financial advice, I thought Tesla was laughably over valued at $40 a share, never bet more than you’re wi…

Investing in any stock is gambling, plain and simple. The only difference is your risk tolerance. Remember when it was impossible for real estate investments to lose money 15 years ago?

Gambling is when the house has an edge, and you will statistically lose in the long run. Investing is when you have the edge.

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

#106

Post by codechicago277 » Tue, Mar 09, 2021, 5:44 PM UTC

unethical_ban wrote: post #79

camjohnson26 wrote: post #46

Earlier quoted context omitted.

Respectfully those are meme stock arguments. A company can have all those things and be worth between 0 and 1 trillion, the question is whether the company is valued accurately by the markets and worth the price. Tesla is valued at what Apple was in 2019, but hasn’t made any profit ever without tax credits. AMD is at $100 billion, which seems high but could be worth it. Doesn’t matter if they mismanage cash and have…

No, they're stock arguments. They're "fundamentals". Did I look at their balance sheet, no. But asking questions about their competition and likelihood of being around and healthy in a few years isn't meme. Even "Hey this has short 140% of float" isn't a meme stock thing. The definition of "meme" stock is it being a meme - is it getting hyped up on social media and reddit with inside jokes and collective action (as m…

If you didn’t look at the balance sheet I don’t see how you can claim to care about fundamentals. The company’s ability to be in business in a few years depends on how much cash they have and how much they can generate. If the market tanks financing dries up, and if they aren’t cash flow positive then it’s game over.

Whether people like the product or not and how they compare to competition only matters if they have cash figured out. Anybody can sell a dollar bill for $0.80 and have a fantastic product, doing it profitably is the trick. WeWork is probably the best example, entering high risk long term leasing commitments and subleasing that space at a loss. They were bid up to an insane $40 billion valuation based on just this, until they tanked pre IPO. Now with the low probability, high impact risk of a global pandemic coming about, they’re struggling to survive and I’m surprised aren’t bankrupt yet. Still have a better product than the competition though.

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

#107

Post by brandmeyer » Tue, Mar 09, 2021, 5:47 PM UTC

ISL wrote: post #98

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…

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 should forbid blatantly exploitative acts. Like this one.

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

#108

Post by lotsofpulp » Tue, Mar 09, 2021, 5:50 PM UTC

camjohnson26 wrote: post #67

JoeAltmaier wrote: post #55

Earlier quoted context omitted.

Sounds like advice for a previous generation. Then, it contradicts itself by say why it won't work (correctly). Maybe its time to rethink those half-century-old memes like 'build wealth incrementally'.

“This time it’s different” Nothing has changed except central bank policy encouraging rampant speculation. The bull market won’t last forever and every generation thinks the fundamentals don’t matter anymore, until suddenly they do. To be fair it is extremely hard to build wealth incrementally these days because of central bank policy, but it’s way better than yoloing life savings.

Is it possible the bull market reflects the realities of big businesses, and tech businesses especially, reaping the rewards of automation and scalability and near zero marginal costs?

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

#109

Post by candybar » Tue, Mar 09, 2021, 5:50 PM UTC

Judgmentality wrote: post #19

tacheiordache wrote: post #15

Earlier quoted context omitted.

Indeed nothing lasts forever but TSLA at least has something to show while GME's business is passé. TSLA is overpriced but at the moment it crashed and will jump back to new heights. Why not take advantage of the notoriety and make a gain yourself?

I think it's obvious that I am holding a substantial amount of GME right now, and I think I should disclose that. Ryan Cohen, the guy who founded Chewy, is on the board for GME and leading an initiative to transform Gamestop into an e-commerce store. In other words he wants to compete directly with Steam, and while many don't realize it yet, Amazon. And this is one of the only people in history who has successfully b…

How does any of this change GME's valuation? Any company can decide to get into anything - the existence of an opportunity that everyone is aware of doesn't impact the company's valuation unless the company's uniquely suited to exploit the opportunity. I don't see how GameStop is particularly well-situated to take advantage of e-commerce or streaming opportunities. They don't have any unique offerings or substantial online presence. They obviously don't have any real tech or product talent or expertise. They also primarily deal with console games and all new consoles lock you into their own online store. They are suddenly going to compete for 2nd place for PC games?

And, Ryan Cohen has no operational role at the company and changing an existing company is very different from building a new one. It's not just having some grand vision, but having the culture and talent to execute on it at every level. And it's unclear Ryan Cohen himself would have any particular expertise here - selling digital goods is very different from selling physical goods.

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

#110

Post by brewdad » Tue, Mar 09, 2021, 5:55 PM UTC

foerbert wrote: post #102

lotsofpulp wrote: post #95

Earlier quoted context omitted.

> Looks to me like the executives saw an opportunity to part some people from their money and took it. AKA business. > That's wildly different from issuing new shares when you have inside information which prices them at zero. That’s wildly different from Hertz’s bankruptcy being public information. If people want to gamble on unlikely outcomes, that’s their business.

That description also fits straight up robbery. I don't think it's a particularly meaningful statement in this situation.

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