Hertz skyrockets more than 100% after Jefferies suggests CarMax or AutoNation could 'swoop in'
- Jefferies analyst Hamzah Mazari suggested that auto dealers such as Avis, CarMax, and AutoNation may be eyeing bankrupt Hertz in a Wednesday note.
- Shares of Hertz skyrocketed more than 100% in intraday trading Wednesday, before paring some gains.
- The most obvious way for auto dealers to swoop in on Hertz would to be to bid for 150,00 of the company's used cars, which are likely to be sold off to shore up cash, according to the note. According to Mazari, selling the cars could raise $3 billion for Hertz.
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Hertz shares spiked as much as 101% Wednesday following a Jefferies note that suggested other auto dealers could "swoop in" on the battered company.
"Our channel checks suggest that KMX and AN among others could be eyeing HTZ in bankruptcy," wrote analyst Hamzah Mazari in a Wednesday note.
Hertz shares jumped following the report, snapping a four-day streak of losses for the company. Later in the day, shares pared some of their gains but still were up roughly 40%.
The most obvious way for auto dealers to swoop in on Hertz would to be to bid for 150,00 of the company's used cars, which are likely to be sold off to shore up cash, the note said. According to Mazari, selling the cars could raise $3 billion for Hertz.
According to the note, the $1 billion in liquidity Hertz held at the end of March likely fell to $365 million by June 30, meaning that the company needs at least $900 million of debtor-in-possession financing.
"We think the longer HTZ takes to re-emerge from bankruptcy with a cleaner capital structure, the more opportunity there is for rivals to pick up share," said Mazari. Bankruptcies typically last six months to two years, according to Jefferies — the Hertz one "could end up being toward the longer end of that range."
