Since Hertz (NYSE:HTZ) filed for bankruptcy protection back on May 22, 2020, little has made sense about the company's stock. While generally shares of bankrupt companies become worthless, Hertz shares jumped from a May 26, 2020, low of $0.40 per share to a June 08, 2020, price of $6.25 per share – a nonsensical and highly speculative $1,462% increase. The scenario became even more unusual when Hertz asked the bankruptcy court for approval to sell roughly 246 million shares of stock to take advantage of the stock price run up. However, the offering has been criticized as akin to robbing unaware investors to turn around and pay a small chunk of its massive $19 billion in debt owed to creditors in bankruptcy.

Rental car desk sign at airport

Image source: Getty Images.

Shockingly, the bankruptcy court approved the Hertz request to offer new shares. For the first time in this insanity, however, something logical finally happened: the SEC said it would review the prospectus supplement, and then Hertz promptly suspended its plans for the offering. While Hertz could eventually offer new shares, it noted in a Form 8-K filing that the company will first need to ascertain "the nature and timing of the staff's review,".

Hertz being allowed to sell shares of a bankrupt company, even if admitting to investors that shares could end up worthless, was at the very least controversial and some might say unethical. Hertz will add the task of answering SEC questions about the potential offering to its list of near-term hurdles that include appealing a decision to de-list Hertz stock from The New York Stock Exchange, continuing operations with limited cash on hand, satisfying a mountain of debt, and potentially restructuring the company. In all likelihood current Hertz shares are probably headed to zero and remaining shareholders will be going down with the ship. If Hertz eventually offers a new set of shares, investors would be wise to watch that development from the safety of the sidelines.