In what is arguably the financial story of the year, late on Friday insolvent Hertz got bankruptcy court approval to sell as much as $1 billion (a number since reduced to $500 million) in stock, targeting the manic retail buyers who had pushed its stock just a week earlier above $6/share. In response, Hertz' corporate lawyer Tom Lauria, who admitted that the stock is "disconnected from fundamentals", said that the company immediately start selling the bankrupt shares from its existing shelf "because once the bid disappears, this historic opportunity will be gone too."
Well, the bid is almost gone (maybe it was the company's warning that equity holders will most likely be wiped out that caused the dam to finally break).
Not only has Hertz failed to sustain any rally in the past two days, when Hertz started selling stock..
... but in an ominous development for Hertz and potentially other (soon to be) bankrupt company such as Chesapeake which may seek to repeat Hertz' historic achievement of flipping the bankruptcy process on its head, and whose own Chapter 11 filing is imminent, it appears that Robinhooders have finally googled what "bankruptcy" means, and in the past two days there has finally been the first sustained, if modest decline in Hertz holders on Robinhood.
The problem for Robinhood is that the momentum is now broken (and this without the SEC even daring to chime in on what will end up being catastrophic losses for ordinary investors) and once the daytrader army realizes that the chance for higher highs, and even greater fools is gone, we expect that the number of users holdings the stock will plummet in the next few days, effectively shutting the window for any further Hertz stock sales.
The question then becomes just how much new Hertz stock has been sold by the company to the retail hordes - we expect an update from Jefferies in the next 24 hours - and when do the lawsuits start once the Millennials who have bought the stock in hopes of overnight riches realize they are facing a total wipeout.