In a Securities and Exchange Commission (SEC) filing today, rental car company Hertz (OTC:HTZG.Q), which is in the process of a bankruptcy reorganization, announced that it has terminated its plans to issue shares of its common stock. The company had gained approval last week from a bankruptcy judge allowing the unusual step of selling potentially worthless common stock shares in a bid to raise needed capital. 

Traders had bid the stock up, apparently hoping to gain from a momentum trade. In an SEC filing from June 15, 2020, the company laid out its plans to sell shares for a total offering of $500 million. Yesterday, Hertz announced it had suspended the plan after the SEC told Hertz that its Division of Corporation Finance intended to review the plan. Hertz now says it will not pursue the share sale. 

couple being handed keys at rental car counter

Image source: Getty Images.

In its filing for the share offering, Hertz disclosed items, including the fact that it was in the process of Chapter 11 bankruptcy reorganization, which "may render our common stock worthless." Other risk factors included that the company "may not be able to maintain a listing" of its common shares and that it "could be required to liquidate under Chapter 7 of the Bankruptcy Code," which also would make common shares worthless. 

The company now may need to seek "debtor-in-possession" financing, according to CNBC. Unlike a share sale, the company would be required to pay back such a loan.

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