Why Is HTZ Stock Sliding Today?

• Hertz said it intends to offer $100 million of common stock through a share-lending arrangement with JP Morgan Securities.
• The company said neither Hertz nor its subsidiary, The Hertz Corporation, will receive proceeds from the sale of the borrowed shares
• Hertz said that the proceeds from the proposed $300 million notes offering will be used for general corporate purposes, including the potential repayment of outstanding debt.

Shares of Hertz Global Holdings Inc. (HTZ) tanked nearly 18% in Wednesday’s pre-market trade after the company announced proposed offerings of its common stock as well as exchangeable senior PIK notes.

Alongside the financing announcements, Hertz provided a second-quarter business update, saying "unexpected" softness in the used car market led to losses on vehicle sales in May this year, compared to gains in April.

HTZ was among the top trending tickers on Stocktwits at the time of writing.

HTZ Announces $100M Common Stock Offering

Hertz said it intends to offer $100 million of common stock through a share-lending arrangement with JP Morgan Securities.

Under the agreement, the shares will be loaned to the underwriter, which plans to sell them and use the resulting short position to facilitate hedging transactions for investors participating in Hertz's proposed exchangeable notes offering.

Hertz said neither the company nor The Hertz Corporation will receive proceeds from the sale of the borrowed shares. Instead, JPMorgan, acting as the share borrower, will pay Hertz a nominal lending fee under the share-lending agreement.

These borrowed shares are expected to be returned to Hertz under the terms of the share-lending agreement, Hertz said.

HTZ Launches $300M Exchangeable Notes Offering

Hertz announced that its wholly-owned subsidiary, The Hertz Corporation, plans to offer $300 million of exchangeable senior first-lien secured payment-in-kind (PIK) notes due 2030 in a private placement to qualified institutional buyers.

The company said that the proceeds from the offering will be used for general corporate purposes, including the potential repayment of outstanding debt.

The notes will pay interest through a combination of cash and PIK interest. The company said that the notes may be exchanged for cash, Hertz common stock or a combination of both at its election.

The aggregate number of shares issuable upon exchange is capped at 19.9% of outstanding shares unless shareholders approve a larger issuance.

HTZ Warns Of Unexpected Softness In Used-Car Market

Hertz also provided an update on its second-quarter (Q2) performance, saying fleet size, revenue, rental days and revenue per day are expected to meet or slightly exceed its prior expectations, supported by healthy demand and stronger-than-anticipated capacity utilization.

However, Hertz said “unexpected” softness in the used-vehicle market caused it to record losses on vehicle sales in May after generating gains in April, creating a headwind for second-quarter profitability.

Hertz reported losses on vehicle dispositions in May, compared with gains in April, and now expects net depreciation per unit per month to be approximately $300.

As a result, the company said its adjusted corporate earnings before interest, taxes, depreciation and amortization (EBITDA) is expected to come in between $50 million and $80 million, toward the lower end of its previously anticipated range.

What Retail Traders Think Of HTZ Stock

Retail sentiment on Stocktwits around Hertz trended in the ‘neutral’ territory, with message volumes at ‘high’ levels at the time of writing.

One user believes that Hertz’ market capitalization makes it an attractive takeover target.

HTZ stock is down 2% year-to-date and 21% over the past 12 months. The iShares Russell 2000 Growth ETF (IWO) is up 39% over the past 12 months, while the Vanguard Small-Cap Growth Index Fund ETF (VBK) is up 30%.

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