As if millions of Jefferies bankers suddenly cried out in terror and were suddenly silenced.
When last week Hertz announced its plans to sell up to $1 billion in bankrupt stock (subsequently trimmed to $500 million) to Robinhooders in an "At The Money" offering from its existing Shelf, there were two reactions i) this is the most insane thing ever attempted, although if it gets done it will be a truly historic outcome, one in which a bankrupt company will have turned over the bankruptcy process on its head funding itself in Chapter 11 not with a supersecured DIP loan but with worthless equity, and ii) where the hell is the SEC on this?
Finally addressing point 2, earlier today SEC chairman Jay Clayton told CNBC that the regulator was actually involved, and contrary to widespread expectations hadn't decided to ignore what many said was clear daylight robbery from manic Robinhood investors. Moments later Hertz stock was halted for hours.
And now we know why: in an 8K published moments ago, the bankrupt car rental giant said that, following communication with the SEC, Hertz was "suspending" the $500 million offering and as a result "the Company is not currently offering any shares under the ATM Program."
And so what would have been the greatest ever feat pulled off by a company and its aspiring investment bank, has been shelved indefinitely, as has Jefferies 3% underwriting fee... at least until Chesapeake or someone else tries to pull this magic trick all over again.
Here is the full 8K comment:
As previously disclosed, on June 15, 2020, Hertz Global Holdings, Inc. (the “Company” or “we”) entered into an open market sale agreement (the “Agreement”) under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $0.01 per share (the “Common Stock”), having an aggregate offering price of up to $500.0 million through an agent (the “ATM Program”).
The offering is pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-231878). On June 15, 2020, the Company filed a prospectus supplement (the “Prospectus Supplement”) relating to the ATM Program with the Securities and Exchange Commission (the “Commission”).
The Company was advised orally by the Staff (the “Staff”) of the Commission’s Division of Corporation Finance in the afternoon of June 15, 2020 that the Staff intended to review the Prospectus Supplement. After discussions with the Staff, sales under the ATM Program were promptly suspended pending further understanding of the nature and timing of the Staff’s review. The Company is not currently offering any shares under the ATM Program. The Company’s advisors have been in regular contact with the Commission since the Staff’s initial contact on June 15, 2020.
The stock, which earlier spiked on the news that the SEC may get involved, only to slump subsequently, was just unhalted and predictably, it has spiked perhaps because Robinhooders no longer see a massive selling overhang.
Unfortunately, their enthusiasm is not reflected in the company's unsecured bonds, where the fact that there will no longer be $500MM in idiot money coming in to boost recoveries is clearly reflected in the price.