Hertz, the bankrupt car rental group, said on Wednesday that it had suspended a controversial $500m share sale after facing scrutiny from US securities regulators.
The announcement came after a near-four hour halt to trading in the company’s shares on the New York Stock Exchange, frustrating day traders whose interest has elevated the share price in recent weeks despite the likelihood that Hertz’s equity value is nil.
The company said that the Securities and Exchange Commission had approached its advisers to review regulatory filings governing the share sale, and that after discussions with regulators it had decided to halt the sale.
“Sales under the [at-the-market offering] programme were promptly suspended pending further understanding of the nature and timing of the staff’s review,” Hertz said. “The company is not currently offering any shares under the ATM programme.”
Hertz launched the stock sale on Monday after getting approval from bankruptcy court, in the hope of raising money to cover expenses during a financial restructuring.
A prospectus for the new shares warned investors that what they were buying was unlikely to be valuable, unless Hertz’s more senior creditors were repaid in full. That, the company said, required a “significant and rapid and currently unanticipated improvement in business conditions”.
The document added: “There is a significant risk that the holders of our common stock, including purchasers in this offering, will receive no recovery under the Chapter 11 cases and that our common stock will be worthless,” it said in its prospectus.
Retail investors have been significant traders of the stock since it filed for Chapter 11 bankruptcy protection in the wake of the coronavirus shutdown of most travel.
Trading was halted at just before noon on Wednesday following comments from Jay Clayton, SEC chairman, who said in a television interview that regulators had views on the disclosures surrounding the proposed share sale.
“We have let the company know that we have comments on their disclosure,” he told CNBC. “In most cases when you let a company know that the SEC has comments on their disclosure, they do not go forward until those comments are resolved.”
Hertz shares climbed 6 per cent to $2.07 after trading resumed at about 3:30pm on Wednesday.