======Hertz======
Hertz (formally Hertz Global Holdings, Inc.) is one of the world's most recognized car rental companies. Founded in Chicago in 1918 with a fleet of a dozen Ford Model Ts, it grew into an iconic American brand, a familiar sight at airports and city centers globally. For investors, however, the name "Hertz" is less about renting a car and more about a dramatic, rollercoaster story of corporate collapse, speculative frenzy, and unexpected rebirth. Its journey through [[bankruptcy]] during the [[COVID-19 pandemic]] became a legendary case study, offering profound lessons on the difference between speculation and investment, the dangers of a [[value trap]], and the rare opportunities found in [[special situation investing]]. Hertz's saga perfectly illustrates how a seemingly doomed company can become a battleground for Wall Street's sharpest minds and a playground for a new generation of traders.
===== The Road to Ruin =====
For years leading up to 2020, Hertz was a company in trouble. It was saddled with billions of dollars in debt, much of it used to finance its massive fleet of vehicles. The rise of ride-sharing services like [[Uber]] and [[Lyft]] created intense competitive pressure, eating into its traditional business model. The company was already skidding, but the COVID-19 pandemic was a catastrophic multi-car pile-up. Global travel ground to a halt, rental demand evaporated, and revenue plummeted.
With no cash coming in, Hertz couldn't make the massive payments on its car fleet. The company's stock price collapsed. To many seasoned investors, including the famous activist [[Carl Icahn]] who sold his entire 39% stake for a huge loss, Hertz looked like a classic value trap—a stock that seems cheap but is actually heading for zero. In May 2020, the company did what seemed inevitable: it filed for Chapter 11 bankruptcy protection. In a typical bankruptcy, the company's [[common stock]] becomes worthless. Game over, or so it seemed.
===== A Bizarre Detour into Meme Stock Madness =====
What happened next was one of the most bizarre episodes in modern financial history. Instead of going to zero, Hertz's stock price suddenly exploded. A wave of [[retail investor]]s, many using commission-free trading apps like [[Robinhood]], began piling into the stock. Fueled by social media hype, they saw a famous brand at a bargain price and bet on a miraculous recovery. Hertz became one of the original [[meme stock]]s.
The situation became surreal when Hertz itself, despite being bankrupt and admitting its shares were likely to be "ultimately worthless," tried to sell $500 million in new stock to capitalize on the frenzy. Regulators quickly stepped in to halt the sale. For value investors, this period was a masterclass in what //not// to do. It was pure speculation, completely detached from the company's dismal financial reality. The price was driven by hope and hype, not by the fundamental value of the business—the polar opposite of a value investing approach.
===== The Unexpected Turnaround =====
While the meme stock crowd was gambling, a different kind of investor was looking at Hertz with a keen eye: the special situation and [[distressed debt]] specialists. They saw something the market was initially missing. The pandemic had disrupted supply chains, creating a massive global shortage of new and used cars. Suddenly, Hertz's biggest liability—its gigantic fleet of vehicles—had become its most valuable asset. The value of its used cars was soaring.
This realization triggered a fierce bidding war to bring Hertz out of bankruptcy. Private equity firms [[Knighthead Capital]] and [[Certares Management]] ultimately won, injecting billions to pay off senior creditors and recapitalize the business.
In a stunning and highly unusual twist, the final deal was so good that it didn't just make the debt holders whole; it also provided a significant payout for the common stockholders—the very shares the company had declared worthless. The retail speculators who held on were vindicated by sheer luck, while the institutional investors who correctly analyzed the company's asset value were rewarded for their skill.
===== Lessons for the Value Investor =====
The wild ride of Hertz offers several timeless lessons for the prudent investor:
  * **Know the Difference Between Price and Value:** The meme stock frenzy was all about price and momentum. The successful turnaround was all about the underlying //value// of Hertz's assets (its car fleet). A value investor focuses on what a business is fundamentally worth, not what the crowd is willing to pay for it on any given day.
  * **Bankruptcy is Not Always the End:** While common stock is wiped out in over 99% of bankruptcies, the Hertz case is a rare exception. It highlights that in special situations, hidden or mispriced assets can lead to surprising outcomes. However, investing in bankrupt companies is extremely risky and best left to specialists.
  * **Assets Provide a Margin of Safety:** The core principle of [[margin of safety]] is buying a dollar's worth of assets for fifty cents. The investors who succeeded with Hertz did so because they correctly calculated that the value of the car fleet provided a backstop that the market was ignoring.
  * **Be Wary of Debt:** Hertz's huge debt load made it fragile and unable to withstand the shock of the pandemic. For value investors, a company with a strong [[balance sheet]] and low debt is always a safer, more resilient investment.