HTZ - Hertz

[JRM]

The problem is the dumbest of the dumb money is buying HTZ.  10 year old Robinhood traders are buying HTZ based on a tip they heard from their Fortnite friends.  I'm not even sure how a minor is able to open up a brokerage account, but it sounds like it is happening.

[DTEJD1997]

The problem is the dumbest of the dumb money is buying HTZ.  10 year old Robinhood traders are buying HTZ based on a tip they heard from their Fortnite friends.  I'm not even sure how a minor is able to open up a brokerage account, but it sounds like it is happening.

Wanna bet that there are going to be lawsuits over this when the "traders" lose all their money?

 

If the kid wins, so much the better....if the kid loses, sue Robinhood.  They should not have allowed a minor to be making trades!  A no lose proposition!

[AzCactus]

The problem is the dumbest of the dumb money is buying HTZ.  10 year old Robinhood traders are buying HTZ based on a tip they heard from their Fortnite friends.  I'm not even sure how a minor is able to open up a brokerage account, but it sounds like it is happening.

Wanna bet that there are going to be lawsuits over this when the "traders" lose all their money?

 

If the kid wins, so much the better....if the kid loses, sue Robinhood.  They should not have allowed a minor to be making trades!  A no lose proposition!

 

Pretty sure the people opening up accounts aren't minors in the legal sense.  They are probably younger adults who are just stupid and don't fully understand what bankruptcy actually means. 

[JRM]

This was the one-off anecdotal data point I was referring to.  I'm sure he's not the only one, though.

 

https://twitter.com/jsmauro13/status/1270415543657529350?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1270415543657529350&ref_url=https%3A%2F%2Fwww.zerohedge.com%2Fmarkets%2Ffortnite-missing-10-year-old-players-they-are-daytrading-robinhood-instead

[UNF2007]

I remember in residency, I had a friend who had invested in the Sapphire glass maker GT Advanced Technologies. After they declared Chapter 11, he had begun averaging down, until he ran it by me in passing and I explained what he could expect for the equity. He was an otherwise intelligent person, but just had not really researched what he was doing. The story in that case, promotional management and social proof/commitment was so strong, he had a very hard time accepting it.

 

HTZ is so strange, because there was not this cult interest until after the Chapter 11.

[Dalal.Holdings]

I remember in residency, I had a friend who had invested in the Sapphire glass maker GT Advanced Technologies. After they declared Chapter 11, he had begun averaging down, until he ran it by me in passing and I explained what he could expect for the equity. He was an otherwise intelligent person, but just had not really researched what he was doing. The story in that case, promotional management and social proof/commitment was so strong, he had a very hard time accepting it.

 

HTZ is so strange, because there was not this cult interest until after the Chapter 11.

 

Many intelligent people do not understand Ch 11, etc because it is not in their wheelhouse.

 

The question is, why did a judge allow for this? Will this security continue to trade on NYSE or will it be delisted prior to the offering?

 

Being listed on the NYSE, no 5th letter, etc means many can be fooled and lured into false sense of safety, esp with all the garbage fake info that spreads like wildfire via social media these days. And where is the SEC? They were in the courtroom and seem fine with allowing this to go through...

 

Why disallow scam Chinese companies from listing here and "protect investors", but then allow something like this to go through?

 

Of course, many "free marketers" on here will say "it's retail's fault for not knowing any better". Strange. At the same time, they claim it's understandable if all these corporate execs of the last decade who levered up didn't prepare for this pandemic. Who could have predicted it? Buffett is past his prime for hoarding cash in preparation for once in a hundred year events, these other execs were in the right to lever up. Let them have their golden parachute...but Robinhooders? Let them burn because they "deserve it"...

 

This is a state sanctioned form of looting--except in this instance, it's done by wealthy, sophisticated bondholders/insiders facilitated by investment bank Jefferies and the victims are poor/middle class retail folks who do not know any better...a most infuriating form of looting if you ask me. But hey, pretty much where American "capitalism" stands these days--socialize the losses of the wealthy (but the gains are privatized of course).

 

I only hope index funds/institutions are not taking any part in this fiasco and putting indexer/pension money into this. In fact, the saving grace of this may be if pensions/indexes are unloading at these prices (of course insiders are too).

 

Brokers should offer a disclaimer to anyone placing a buy order on something like this security. Of course, RobinHood will not. Speaking of which, why is RobinHood allowed into SIPC?

 

Overall an interesting situation that will be in the history books. And then consider that Carl sold out at about $0.72 a share...

[SharperDingaan]

Ultimately HTZ will receive an offer for the assets only, that their bankers cannot refuse. The Ch 11, and future DIP financing, are just devices to raise the price of those assets as much as possible. So that bankers can reduce their loan-loss provisions.

 

Robin Hood is nothing new, it is just a new generation of patsy's, in a new wrapper.

Just a little bigger this time around, as social media has introduced them to derivatives - now everyone can play with matches ;D

 

More concerning is that if pre-recovery (Covid-19) unemployment levels end up looking like those of the Great Depression .... this is reminiscent of the 6-9 months just before the Great Crash of 1929. Great party, until it suddenly stopped - and ended the Great Gatsby era. All that one can really do, is progressively sell down to retire debt, and roll an exchange traded put on the index as insurance.

 

The takeaway here is how are you going to 'live' - going forward - if there is a repeat of the Great Crash of 1929?

If you don't have an answer to that - you are little different to that Robin Hood patsy.

 

Hopefully, it all works out.

But if it doesn't - you live to fight another day, whereas a great many others do not.

 

SD

 

 

 

 

[BG2008]

This post by Bill Brewster on Twitter is gut wrenching

 

 

How the hell does Robinhood allow a 20 year old to go $700k in the red without the proper risk control?  The kid took his own life.  This is brutal and wrong on so many levels.

[SHDL]

This post by Bill Brewster on Twitter is gut wrenching

 

 

How the hell does Robinhood allow a 20 year old to go $700k in the red without the proper risk control?  The kid took his own life.  This is brutal and wrong on so many levels.

 

I saw that too. The $700k number seems totally out of whack given the margin rules and such that I’ve seen elsewhere, but maybe Robinhood does things “differently.” If this is real I wouldn’t be surprised if Robinhood (the brokerage) went belly up within a year or so.

[given2invest]

It would be hard for a 20k or 10k account to ever have a 700k margin deficit.  Would be surprising how bad the risk procedures would have to be for selling naked options or leverage on futures, currency, etc. 

[rb]

This post by Bill Brewster on Twitter is gut wrenching

 

 

How the hell does Robinhood allow a 20 year old to go $700k in the red without the proper risk control?  The kid took his own life.  This is brutal and wrong on so many levels.

I don't know, that story sounds like bullshit to me.

[Dalal.Holdings]

This post by Bill Brewster on Twitter is gut wrenching

 

 

How the hell does Robinhood allow a 20 year old to go $700k in the red without the proper risk control?  The kid took his own life.  This is brutal and wrong on so many levels.

 

Not the first risk management lapse at Robinhood if this is true:

 

https://www.marketwatch.com/story/trader-says-he-has-no-money-at-risk-then-promptly-loses-almost-2000-2019-01-22

 

Again, why are they allowed in SIPC (which means there could be contagion impacting other brokers)?

 

Very easy to label people as "patsies" who somehow deserve their fate in capital markets. However, margin requirements, SEC filings, etc exist to protect investors. There should be multiple checks in place to protect even know nothing investors from financial devastation...

 

So now you have a bankruptcy judge who allows a firm to issue what will likely be completely worthless shares in order to help bondholders, all with the help of Jefferies, listed on NYSE, egged on by certain brokerages...

 

Meanwhile corporate America bought back stock while issuing exec comp & levering up with a nation passively invested in their firms via index funds not paying attention to the going ons at each individual business...

 

Just don't be surprised when there is blowback from the public against corporate America and WS...

[SharperDingaan]

This post by Bill Brewster on Twitter is gut wrenching

 

 

How the hell does Robinhood allow a 20 year old to go $700k in the red without the proper risk control?  The kid took his own life.  This is brutal and wrong on so many levels.

I don't know, that story sounds like bullshit to me.

 

Not so much bullshit, as omission of key facts ...

The only way a risk manager allows the margin to go this high, is if the account is guaranteed. Much more likely that little Johnny had joint access (credit card) to a HELOC, that is against the family residence. Robin Hood was very likely lending against the maximum HELOC amount, and now Mom/Dad have a 700K mortgage.

 

Robin Hood is not a baby-sitter. Sorry to say it - but when parents don't parent, sh1te happens.

Johnny could just as easily accidentally have driven the family chariot into a tree at 160 kmh, or accidentally shot up on fentanyl.

Opening up an unsupervised Robin Hood account is not different.

 

SD

 

 

 

 

[rb]

This post by Bill Brewster on Twitter is gut wrenching

 

 

How the hell does Robinhood allow a 20 year old to go $700k in the red without the proper risk control?  The kid took his own life.  This is brutal and wrong on so many levels.

 

Not the first risk management lapse at Robinhood if this is true:

 

https://www.marketwatch.com/story/trader-says-he-has-no-money-at-risk-then-promptly-loses-almost-2000-2019-01-22

 

Again, why are they allowed in SIPC (which means there could be contagion impacting other brokers)?

 

Very easy to label people as "patsies" who somehow deserve their fate in capital markets. However, margin requirements, SEC filings, etc exist to protect investors. There should be multiple checks in place to protect even know nothing investors from financial devastation...

 

So now you have a bankruptcy judge who allows a firm to issue what will likely be completely worthless shares in order to help bondholders, all with the help of Jefferies, listed on NYSE, egged on by certain brokerages...

 

Meanwhile corporate America bought back stock while issuing exec comp & levering up with a nation passively invested in their firms via index funds not paying attention to the going ons at each individual business...

 

Just don't be surprised when there is blowback from the public against corporate America and WS...

Well I'm not a lawyer but I'm pretty sure that a bankrupcy court judge does not have a duty of care for the investment public. He's supposed to govern the proceedings so that's why he allowed it.

 

The investment bank name thing is a myth. Equity departments at investment banks will sell any dogshit paper for a fee. Though I don't think that Jeffries will pitch this to their clients.

 

The SEC, sure. But the TESLA thing confirmed that the SEC is a joke these days. So I wouldn't count too much on the SEC.

[SHDL]

Again, why are they allowed in SIPC (which means there could be contagion impacting other brokers)?

 

If I were a psychopath doomsday newsletter writer, I would really exploit this point to maximum effect. Send out an ominous warning to people that their brokerage accounts may not be entirely safe, even if it’s 100% cash, and trigger a wave of panic selling and forced liquidations. The government/Fed is virtually certain to step in very quickly but the initial market action could be enough to gain a reputation and a good number of subscribers.

[Spekulatius]

This post by Bill Brewster on Twitter is gut wrenching

 

 

How the hell does Robinhood allow a 20 year old to go $700k in the red without the proper risk control?  The kid took his own life.  This is brutal and wrong on so many levels.

I don't know, that story sounds like bullshit to me.

 

Bill Brewster is legit, but he stated himself that he hasn’t really seen the brokerage account balance yet. So he can’t confirm that part.

 

Robin hood had problem with margin before, so maybe Bill’s relative used a cheat code loophole:

https://www.cnbc.com/2019/11/05/some-robinhood-users-were-able-to-trade-with-unlimited-borrowed-money.html

[Guest cherzeca]

HTZ will likely sell as much stock off the shelf reg as possible, price be damned, since any funds raised from equity is gravy compared to a DIP.  this will drive the stock price to zero...which is where it should be now.  you have never seen this before in a ch11 since no stockholder group has ever been this stupid

[JRM]

The other bold move recently is the USO fund which recently got 1 billion new shares approved by the SEC.  That's 1 BILLION shares with a current float of 185 million shares.  I'm guessing they don't dump all the shares on the market at once, but clearly another case of an incredibly uninformed investor base.

[Packer16]

My question to all that think this is a snarky move is will there not be equity in this situation if travel revives?  Similar to GGP in the GFC.  If so then given the offering would not the judge include an equity committee for the BK & these security holders would have a right to provide more financing but also receive any value above the sub debt & accrued interest? Maybe I am off base but I do no think a judge in there right mind would allow an equity offering for no consideration.

 

Packer

[SharperDingaan]

The sad thing is that the HTZ assets are actually a very good acquisition for an existing small leasing company. Broken-up into pieces, each piece acquired at cents on the dollar, producing ability to INSTANTLY scale up (in the the best pieces) multiple times, and ability to INSTANTLY and RELIABLY upgrade existing IT to match the new operating requirements (& save on existing expenses). Smart.

 

To the uniformed (Robin Hood) this is rescue! And the more dilution, the cheaper the HTZ lottery ticket gets! Bring it on!

Of course to the predatory, short everything you can - until the borrow cost/share equals the market price/share, then cover.

Lots of bunnies. Eat very well.

 

SD

 

 

[Dalal.Holdings]

Normally I don't give much credence to Zerohedge, but this is on point:

 

https://twitter.com/zerohedge/status/1271883216459378693

 

Robinhood offers free trades and makes money selling its users' order flow (a la Flash Boys). These days, this particular order flow can be very profitably exploited by firms that purchase it (such as Citadel) to front-run these speculative, momentum driven plays that largely arise on this brokerage.

 

And note that a lot of the speculative momentum we are seeing may not merely be coming from retail traders, but sophisticated front-running traders who are seeking to profit (early) off the momentum.

 

Does this make Robinhood incentivized to encourage even more speculative activities on its platform? So that sale of its order flow generates more revenue?

 

In other words, we may ironically have the Legend of Robin Hood playing out in reverse: taking from the poor and giving to the rich.

 

Here is an example of Robinhood's marketing found by a Twitter user:

 

 

[Cigarbutt]

The formation of equity committees has been on the rise, with the oil price volatility being a major driving force.

 

If Hertz offers shares in the open market, consideration to the formation of an equity committee is almost a given.

 

From a business sense, the ABS debt is hard to value and used car prices have recovered. The rest of the debt (bonds etc) is also hard to value and equity value recovery is possible under certain very specific (and very optimistic) scenarios. However, what seemed to have primed the interest in the stock was the actual announcement of the bankruptcy, not an actual change in fundamental odds. What is fascinating here is that the price movement (appears to be mostly sentiment driven but who knows?) in shares, if significant and sustained, could derail a well thought out short sale investment thesis. At this point, there is a HUGE discrepancy between what bond holders are expecting (it's reasonable to think that the posture is more fundamentally based) and what the shareholders are expecting. But who are the shareholders?

 

Forming an equity committee may present a challenge. Usually the major shareholders are "consulted" and the exercise is to balance the costs vs the possibility of solvency or near solvency. With such a high turnover of shares and such a discrepancy in value assessment, what does the typical shareholder want? Sell to a greater fool?

 

The Bankruptcy Judge will typically defer to the business judgement of managers, trustees or the market (given certain basic requirements) and contrary to an investor looking at this from a fundamental aspect to make money (short or long), the judge only needs to appreciate the presence of competing interests (if they exist) and to allow price discovery. If the judge is concerned, there are ways to communicate that. One way is to underline the rules of the game and, for example, to make sure that investors know they are buying potentially worthless pieces of paper but that's already spelled out.

 

To invest or not and if the process is right or not are two separate decisions.

[Guest cherzeca]

equity committees usually get the hind teat.  for one thing, who holding HTZ equity is going to hire financial and legal advisors?  Icahn is long gone.  in a situation like this, some shareholders petition to set up an equity committee and do nothing and get nothing accomplished.

[Spekulatius]

Maybe that are the people that are trading stocks like HTZ nowadays:

[5xEBITDA]

equity committees usually get the hind teat.  for one thing, who holding HTZ equity is going to hire financial and legal advisors?  Icahn is long gone.  in a situation like this, some shareholders petition to set up an equity committee and do nothing and get nothing accomplished.

 

GAMCO owns a little less than 3% of HTZ and filed an objection to the issuance of new equity in court (which was overruled), but I highly doubt they'd get so involved as to create an equity committee.