This is how fucked up our financial reality is: on Monday, when the market hit its absolute blow off top phase and Robinhooders sent the stock of bankrupt Hertz as high as $6.25, resulting in a market cap of just under $900 million, we joked that "we hope the company sells a few hundred million worth of stock - after all there is apparently endless demand for its shares - just so we can test the so-called "price discovery" of Powell's latest and greatest FOMO bubble."
Just five days later this absurdity is now fact.
Bringing us one stop closer to what we called "The Most Absurd Moment In The History Of Capital Markets", Hertz just won bankruptcy court approval to sell (or at least try) up to $1 billion in worthless stock to maniac daytraders. Not even Enron tried this.
As Bloomberg reports, Judge Mary Walrath ruled that Hertz can go ahead with the offering, which we reported last night, could take in as much as $1 billion according to underwriter Jefferies. And kudos to Jefferies: with the company set to receive 3% on the offering, if the bank finds enough Robinhood teenagers to sell the full billion, it will make $30 million from selling worthless garbage to idiots.
There is still some chance that the SEC will stop this travesty, especially after the company told the court it would warn buyers that "the common stock could ultimately be worthless", although we wouldn't hold our breath.
The decision came just days after the The New York Stock Exchange starting proceedings to delist bankrupt Hertz’s stock.
So the next time someone asks where in the cycle we are, tell them a company is about to do something that has never been tried before: an Initial Bankruptcy Offering, where the proceeds from 10-year-old investors will go to making creditors that much closer to whole.
In short: we have officially entered the "absolute idiocy" phase thanks to Powell, who now owns this epic mess.
Fuckin’ right we are BACK. IN. BUSINESS.— Hertz Investor Relations (Parody) (@Mrs_Skilling) June 12, 2020
Thank you, Robinhooders.
Thank you, Wall Street Bets redditors. Thank you, Jerome Powell.
Thank you, late stage capitalism. https://t.co/fnGoOu87A3
Hertz stock dropped as much as 8% on the news that the company will be selling worthless stock to teenagers, although since nothing matters in this giant Fed-backstopped game of hot potato, at this point the stock may go far, far higher as creditors manipulate their recovery via the upcoming equity offering and ignite another massive round of upward momentum so they can raise far more cash, something they would easily achieve if the stock is trading at $20 instead of $2.
The court order can be found here.