Last updated: Friday June 05, 2020 KSA 20:15 – GMT 17:15
Posted on: Friday June 05, 2020 KSA 19:42 – GMT 16:42
Source: Dubai – Alaa Al-Minshawi
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Shares of Hertz Global Holdings, a car rental company that filed for bankruptcy protection, rose more than 100% in Friday’s trading, bringing the share price to more than $ 3.
On May 23, the US car rental group Hertz, founded more than 100 years ago and known worldwide, announced that it had placed itself under the US bankruptcy system as a result of the spread of the Covid-19 epidemic.
Hertz rocket shares rose after the release of the jobs report in America for the month of May, which came positive, amid optimistic news about the aviation industry indicating that the worst is over.
Despite these hikes, investors should read and understand Hertz’s current situation.
And certainly there is reason for the broader transport sector to be optimistic, as the May employment report indicated that 2.5 million jobs added to the non-agricultural sectors compared to analysts’ expectations for a loss of about 7.5 million jobs in May.
Moreover, the American Airlines Group said on Thursday that it plans to increase flights by 74%, next month, which gives investors an indication that it may be time to accumulate troubled transportation stocks if the worst impact of the Corona epidemic is behind us.
It is certain, in normal circumstances, that the expected increase in flights will be good news for Hertz, which generates the majority of its revenue from consumers who travel to and from airports, but these are not normal conditions.
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Hertz has already filed for bankruptcy protection, and is currently in the process of settling with top creditors.
Nearly $ 15 billion of Hertz’s total debt of $ 19 billion is linked to the financing of its fleet, which has left the company in deep trouble.
Speculating on Hertz shares is considered a very dangerous game, especially in light of the possibility that the value of the company will reach zero.
The company has time to negotiate and can satisfy debt holders with the new and restructured Hertz shares to give them something of value to their debt.
Hertz has quadrupled since the opening price last Wednesday, but long-term investors should see the picture in all its aspects.
On April 21, the group announced the abolition of ten thousand jobs in North America, or about 26.3% of the number of its employees in the world, in order to save money in the face of the uncertainty resulting from the measures surrounding the epidemic.
And “Hertz” explained that 20 thousand people in total were actually demobilized, making up about half of the number of workers in the world.
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