Worthless stock, you say? I won't get fooled again!

It's been a while since Hertz has been putting much of anybody in the driver seat. No business travel. No pleasure travel. In just a few short months, we've been turned into masked marvels of stay-at-home-ness. 

I have no idea how Hertz was faring before the pandemic hit, but I'm guessing not great. Zipcar must have put a bite on them when it drove into view in the early oughts. And then Uber and Lyft came along. 

Once Zipcar was available, I stopped renting cars unless I needed one for an overnight trip somewhere. And once I discovered the magic that is Uber - I first learned about it when a fellow Zipcar returner in the Boston Common Garage started raving about it and showed me the app - I rarely took a Zipcar anywhere, either.

But however Hertz was doing - and, hey, I'm not a business journalist so I don't have to look it up - it's safe to say that coronavirus hasn't helped their business any. A year ago, their stock was trading at $15-ish; just pre-COVID, $10-ish. (So I did look it up afterall. Just a bit.)

Anyway, here they sit, filing for bankruptcy, and, in the midst of it all, they're trying to float $1B worth of shares as a way to raise some cash and pay off some of the mountain of debt that's forced them into bankruptcy. And there's the looming specter of Hertz stock being delisted.

But on their way to penny stock-hood:

Hertz asked permission for the sale after a nearly tenfold increase in its stock from 56 cents on May 26 to $5.53 on Monday. The company told the court it would warn buyers that “the common stock could ultimately be worthless.” (Source: Boston Globe)

"Ultimately worthless." Now where have I heard that before.

Decades ago, I worked for Wang, which had an employee stock purchase plan. Chump that I am, I did not want to work for a company I had so little faith in that I wouldn't buy their stock. So I had them take money out of my paycheck. Not a ton, but the amount that sticks in my mind is that I ended up paying roughly $9K for the shares I bought over the two-and-a-half years I was with the company. Not a ton, but if my recall is correct, I made a total of roughly $150K over those two-and-a-half miserable, nearly insufferable years. So, 6% of my pay. So, while not a ton, it was plenty.

I think the deal was that we bought the shares at a 15% discount, and had to play Texas Hold 'Em for a few months before we could unload. Either the share price was never high enough to cover the cost, or I was too lazy to bother, but within a couple of years after I departed that company, the shares were worth zero.

Well, not quite zero, as I was able to take a capital loss on it.

Live and learn. 

My next company was private, and I did make some money when we were acquired. But I did end up holding some shares in Teradyne, the company that acquired us, and did okay with it. (I think I still have some around here somewhere. It's just in an account that I never look at.)

Next up, Genuity, which in the go-go years of the late nineties/early aughts had a big old IPO for themselves.

Remember when I said live and learn? I meant live and not learn.

Chump that I was, it didn't feel right to me, as a director with 25 or so employees under me, that I didn't have enough faith in the company to take part in the IPO. (I almost typed in "take advantage." Hah to that!)

The stock was projected to go out at $11/share, and I calculated that the amount I was prepared to lose was $11K. So 1,000 shares it was.

Good thing I was prepared to lose that $11K.

It could have been worse. Some of my colleagues took out second mortgages or raided their kids' college funds. I knew some couples where both worked at Genuity, and they doubled down. There was a limit to how much you could invest - half your salary? In any case, you could do yourself plenty of damage. 

The day before the IPO, there was an article in The Boston Globe on the complexity of this offering - a spinout from Verizon, and, at the time, the largest IPO in history - that ended with the words "This one's for the pros."

Should have listened.

On IPO day, the stock went out and started declining. By the close of the market, share price was down around $7. 

Us newly minted shareholders would have sold then and there, but we had to hang on for six months... Six long months, during which we all sat there watching the share price wend its way down toward zero. At least I was prepared to lose that $11K. Others were out a lot more. And the ones who'd invited 'friends and family' to partake of the feast, well, as one colleague told me, "My father-in-law didn't like me to begin with."

Anyway, given my history, you might think I'd be a natural for picking up some Hertz. But I only make bad investments in companies I work for, thank you. Not to mention that I'm older and wiser these days, and would listen to what folks who actually follow this stuff have to say:

“Unless a genie or a lamp showed up the collateral pool, we expect the eventual equity value will be zero,” the CreditSights analysts said.

Investors eyeing Hertz might be some of the same who have been buying “deep value ‘penny-like’ stocks” on Robinhood, said Nancy Tengler, chief investment officer at Laffer Tengler Investments, also ahead of the decision.

“This is not investing. It is gambling,” she said.

“This is for the quick buck crowd, not long-term investors,” Tengler went on. (Source: Market Watch)

These days, I try harder not to get sucked in. Put me down for include me out!