Hertz Global Holdings Inc. shares plummeted an additional 11% on Thursday, June 25, 2026, following a 41% drop on Wednesday, putting the rental-car chain on track for its steepest weekly decline since its 2021 relisting after emerging from bankruptcy. The downturn was triggered by Hertz's announcement of a concurrent stock issuance and bond offering, alongside reporting preliminary earnings that fell short of analyst expectations.
The company is taking an unusual approach to its debt issuance, offering $100 million in shares designed to be shorted by buyers of $300 million in convertible payment-in-kind (PIK) notes. This strategy aims to allow note investors to hedge their positions, a necessity given the limited availability of Hertz stock for shorting, as much of it is concentrated in institutional and private equity hands. J.P. Morgan Securities LLC, an underwriter for the stock offering and an arranger for the notes, will be the recipient of these loaned shares, and will pay Hertz a nominal lending fee for their use; Hertz will not receive any direct proceeds from the stock offering itself. The notes' proceeds are intended to repay outstanding debts, with Hertz having $18.2 billion in total debt as of March 31, 2026.
Hertz warned that "unexpected softness in the used car market" would increase its depreciation costs, leading to an adjusted corporate earnings before interest, taxes, depreciation, and amortization (EBITDA) of no more than $80 million for the second quarter, significantly below analyst estimates. This profit warning, coupled with the capital-raising plan, was described by Mark Hackett, chief market strategist at Nationwide, as a "sign that they see the need to do something drastic" and a potential "capitulation of those that had been holding on."
The stock offering is expected to be highly dilutive to existing shareholders. Initially, to raise $100 million, the company would need to sell over 25 million shares, representing 21% of its public float, according to Matt Maley, chief market strategist at Miller Tabak + Co. Subsequently, Hertz confirmed it would sell 37 million shares at $2.70 per share, a 10% discount from the previous closing price, and increased its notes offering to $350 million. The company's recent efforts to streamline operations, optimize used car sales, and refresh its fleet to reduce depreciation costs were meant to lead to positive earnings this year, making the profit warning a notable setback in a volatile period for Hertz.
