The car rental leader got a big investment from a major hedge fund manager.
Hertz Global Holdings (NYSE:HTZ) has not been on investors’ radar for years, but it showed up in a big way on Thursday as the stock skyrocketed more than 50%.
The catalyst was a major investment from noted investor Bill Ackman, CEO of hedge fund Pershing Square Capital Management.
It was good news for the beaten down car rental company, which has had its share of troubles in recent years. In 2020, the COVID pandemic pushed it into bankruptcy. It emerged from bankruptcy about a year later, in 2021, but it stumbled again.
The company made a big bet on EVs, adding 100,000 Teslas, along with other EVs to its fleet, but it did not pay off. In fact, it led to weaker demand, as customers sought out traditional gas-powered cars, and higher maintenance costs.
Last year, the company decided to reverse course, selling off a third of its EV fleet last year, but at a significant discount. The result was a $2.9 billion net loss in 2024, which sent the stock price spiraling.
“As I reflect on my first eight months at Hertz, 2024 was undoubtedly a challenging year for our company, but I am pleased to share that we’ve taken the necessary actions to turn the page on the past and set Hertz up for ongoing success,” CEO Gil West said back in February during the Q4 earnings call.
Hertz stock went from about $32 per share back in October of 2021 to below $3 per share in late 2024. Even as of Tuesday, April 15, the stock was trading at around $3.70 per share. But after the Ackman news, it should up to over $8.50 per share – a 50% one day hike.
Ackman takes big stake in Hertz
An SEC filing released on Wednesday showed that Ackman and Pershing Square held 12.7 million shares of Hertz valued at roughly $46 million. This represents about a 4.1% stake.
But Ackman has reportedly added to the Hertz position since the beginning of the year. According to CNBC, citing a person familiar with the matter, Pershing now owns a 19.8% stake in the company, making it the second largest shareholder.
Ackman has not commented on the move as of yet, but investors were buying in on the hope that the famed investor can turn things around.
Before Hertz went bankrupt in 2020, activist investor Carl Icahn made a huge investment in Hertz in 2014 in an attempt to turn things around. He was the largest investor with nearly a 40% stake. But after COVID hit and the company declared bankruptcy, Icahn sold his shares at a reported $2 billion loss.
That’s not to say Ackman can’t get it going in the right direction, but it just helps to know the history. The CEO struck a optimistic tone on the Q4 earnings call.
“While there’s still a lot of work to do, we are already seeing encouraging signs of progress as we’ve implemented fundamental changes, which have laid the foundation to transform our company for the long term,” said West.
Hertz has a big brand is one of the leaders in the car rental space, so it has that going for it. But its not even that cheap trading at 23 times earnings and turning things around will not be an easy road to travel – even with Ackman at the wheel.
