Hertz Global Holdings Inc., which has drawn parallels to Tootsie Roll Industries Inc. stock, is on a historic run, skyrocketing 56% Wednesday. That announcement led to one of the largest increases ever. Pershing Square Capital Management, run by the renowned investor Bill Ackman, took a 39 percent interest in the rental car company. This development is a huge win for Hertz. Just four years ago, the rail company did so, having exited bankruptcy after filing for Chapter 11 in the midst of the pandemic in 2020.
Hertz’s public shares have gone up over 400% since a surprise disclosure in a recent regulatory filing. This filing confirms that Pershing Square has increased its stake in the company to 4.1%. The hedge fund received its exemption from the Securities and Exchange Commission (SEC). This exemption allows them to delay revealing their stance until Wednesday. This clever tactic gave Pershing Square time to accumulate additional shares before filing. In doing so, it solidified its position as Hertz’s second-largest shareholder.
Although the market response to Hertz bankruptcy has generally been positive, the challenges ahead for Hertz will be profound. The company’s 2024 fourth-quarter earnings included a shocking $2.9 billion loss. This loss was offset by a $245 million adjustment associated with the sale of electric vehicles (EVs) in the quarter. After emerging from bankruptcy in 2021, Hertz placed a big bet on all-electric vehicles, making an initial—or at least, widely-reported—$4 billion investment in Tesla. At least this decision has been somewhat costly for Hertz. This large and sudden drop in Tesla residual values has been a big blow to their bottom line finances.
Hertz has had a rough go of it for most of the last decade, facing tumultuous waters in the rental car market. The company took a courageous leap into the EV era to refresh its fleet. This approach helped draw in a market of eco-minded consumers. Unanticipated financial impact The local financial implications of this decision have caused consternation for investors and market analysts.
Pershing Square’s investment in Hertz signals confidence in the company’s potential for recovery and growth. The fund more than doubled its stake via both shares and swaps, offering further proof of its confidence in Hertz’s long-term prospects. The market certainly responded, announcing a significant hedging bet on Hertz’s renewed future prospects. At the same time, the tech giant has continued to experience record losses and a worsening reality.