Chesapeake Energy; Bankrupt Hertz; Bankrupt Whiting Petroleum ; Borr Drilling; PYX; Michaels, All Up 50-100%; Oil Crashes 3.4%; S&P 500 Officially Recovers all of the Losses Incurred From the Economic Shutdown, and Nasdaq Somehow Makes Another New High…

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Last week, Citigroup analysts made the suggestion that much of what has been driving this incomprehensible stock market rally might be the result of short covering, noting the extreme divergence in equity outflows vs the MSCI World Index.


Judging by the price action we continue to see with tickers like CHK, HTZ and WLL (companies that are quite literally bankrupt), there very well could be some truth to that statement.

Oil stocks have been going berserk, with companies like Occidental Petroleum recording its largest intraday price move in its entire history as a publicly traded company, even in light of the fact that many of these companies can barely break even at $40 per barrel…

As of the close, the S&P 500 has somehow managed to return all of the losses that resulted from the economic shutdown, and the Nasdaq has again made another new high..

UPDATE: It was just reported by Bloomberg after market close that Hertz is planning on filing for bankruptcy. Read more

Root9b is another company that has exhibited similar price action right before being delisted from the Nasdaq…

Source: tradingview
Source: tradingview

In this reddit thread, you can see that many people are having troubling understanding why the price is up so much..

It seems very likely that this somehow has something to do with short covering.

Then comes the news from Bloomberg

Source: Bloomberg

HERTZ recently did something similar. The company announced that it intended on filing for bankruptcy, then for what seemed like no logical reason whatsoever, the price proceeded to spike multiple 100’s of percent..

Should we expect any less? Both the sitting CEO’s of Nasdaq Inc and Morgan Stanley are the acting directors of the New York Fed, considered by many to be the defacto central bank for all of America.

But back to Hertz..

The price increased by as much as 1400% from the lows established on May.26th.

On June.2nd, 2020, at 4:15pm ET, the court deemed the equity interests to be completely and utterly worthless 19 times in one of the company’s SEC filings..(yet share price somehow rises 331.39% 3 days later).

Icahn admits that he sold all his shares on May.27th

(SC 13D/A’ on 5/27/20) “I have been an investor and supporter of Hertz since 2014. Unfortunately because of Covid-19 which has caused an extremely rapid and substantial decrease in travel, Hertz has encountered major financial difficulties and I support the Board in their conclusion to file for bankruptcy protection. Yesterday I sold my equity position at a significant loss, but this does not mean that I don’t continue to have faith in the future of Hertz. I believe that based on a plan of reorganization that includes new capital, Hertz will again become a great company. I intend to closely follow the Company’s reorganization and I look forward to assessing different opportunities to support Hertz in the future.”

(06/11/2020) News just came in today that the company is legitimately considering doing an equity offering….???? Read more

Somebody on reddit does a good job breaking down the financials..

An actual, serious look at Hertz.

This isn’t my typical type of investment, nor am I holding (or advocating people to hold) Hertz.

However, with the recent publicity this way getting, I decided to take a quick look at it and see if there was any substance behind the rise in Hertz after bankruptcy. As I’m writing, HTZ is trading at $2.83, giving it a market cap of $403mm. I’m assuming that the bankruptcy continues and the following is a liquidation view of the stock. Under Chapter 11, the company hopes to continue its operations at a reduced scale. During proceedings, shareholders are last in line to receive anything from the bankruptcy, after secured and unsecured creditors.

Off the most recent 10-Q:


There was $1 billion in cash

There was $2 billion in receivables.

There were $14.3 billion of cars which will be sold off.

Liabilities that have to be paid off before shareholders get anything:

There’s $14 billion of secured debt used to purchase the cars (almost exactly the same as value of the actual cars)

There are $4 billion of bonds, and let’s say $2 billion of other unsecured liabilities.

There are continuing operating costs despite no revenue after the 10-Q due to the lockdown, and also costs throughout bankruptcy.

So now let’s add up all the assets and see what the shareholder will end up with:

It’s likely any flood of used cars into the marketplace will depress prices significantly and make the $14 billion unrealistic to achieve. For the sake of the HTZ holders, I’m going to assume that they get the full sum, which completely pays off the secured debt.

It’s difficult to judge what operating costs they’ve had, since they’ve cut operations at the same time as revenue dried up due to the pandemic. For the sake of simplicity, let’s say the costs this quarter cancel out the cash on hand completely, and the accounts payable cancel with the accounts receivable.

The costs of a Chapter 11 bankruptcy for a company this size are massive, and will likely cost the entirety of the capital raise – if it is successful.

So now, we have:

$4 billion of bonds that need to be paid off before the shareholder STARTS to get anything out of the company. This is backed up by the bond yields before the whole massive explosion started, where they yielded in a range from 20-25%.

So essentially, the long thesis on Hertz right now is that Hertz have undervalued their used cars by a considerable margin; the smaller, reorganised Hertz will be extremely successful at creating cashflow in the future while starting with no assets (and no debt).

UPDATE: June.24th, 2019
Hertz skyrockets 100% after Jefferies analyst suggests Hertz used vehicle inventory worth $3 billion.

But even light of this sudden spike in the value of the equity interests, Hertz bond prices remained unchanged.

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