Hertz Global Holdings has priced its IPO and is expected to list on Nov. 9, 2021. The company raised about $1.3 billion in the offering. Hertz stock will trade under the ticker symbol “HTZ” on the Nasdaq. What's Hertz's forecast, and should you buy the stock?
Founded in 1918, Hertz offers vehicle rental services. The company emerged from bankruptcy in June 2021. Hertz is currently listed on the over-the-counter market under the ticker symbol “HTZZ”.
Hertz's IPO date and price
Hertz IPO stock is expected to begin trading on Nov. 9. The company priced its stock at $29 a share for the IPO, which is the upper end of its suggested range of $25–$29. It also raised the offering size to more than 44.5 million shares from 37.1 million, signaling that the IPO is oversubscribed and the company may raise more capital than expected. Hertz isn't selling any shares and won't receive any proceeds from the offering. The proceeds will go to selling stockholders.
The underwriters for the offering include J.P. Morgan, Goldman Sachs, and Morgan Stanley, among others. The underwriters have the option to purchase an additional 6.7 million shares at the IPO price from the selling stockholders. Hertz intends to repurchase $300 million in shares from the underwriters.
Hertz stock’s forecast
Hertz operates a vehicle rental business through the Hertz, Dollar, and Thrifty brands across the U.S., Europe, the Caribbean, Latin America, the Middle East, Canada, Australia, and New Zealand. The company also operates car-sharing and car-sale services worldwide.
According to Grand View Research, the global car rental market is expected to grow 4.6 percent compounded annually between 2021 and 2028 to reach $140 billion. People are expected to take more business and leisure trips.
Hertz is seeking a valuation of about $13.9 billion in its IPO. Based on its pro forma market cap, Hertz’s 2020 price-to-sales multiple is 2.6x. To compare, Avis Budget Group has a next-12-month EV-to-sales multiple of 3.4x.
Hertz IPO stock isn’t a good buy
In the first nine months of 2021, Hertz's revenue rose 34 percent year-over-year (YoY) to $5.4 billion. However, the company’s revenue fell 46 percent YoY in 2020. Hertz posted a net income of $626 million in the first nine months of 2021, up YoY from a net loss of $1.4 billion.
In May 2020, Hertz filed for Chapter 11 bankruptcy protection for its U.S. operations, citing the effects of the coronavirus pandemic on worldwide travel demand. However, the company exited bankruptcy in June 2021 with $6 billion in fresh equity from Knighthead Capital Management, Certares Opportunities, and Apollo Capital Management.
Hertz's stock price skyrocketed after the company announced a contract to acquire 100,000 Tesla cars last month. Half of the 100,000 cars will be used for Uber rentals, while the other half will be used for standard car rentals. However, the stock is falling after Tesla CEO Elon Musk said no contract had been signed with Hertz yet.
In 2021, Hertz is benefiting from car shortages pushing vehicle rental prices to historical highs. Overall, the company isn’t using the IPO proceeds to reduce debt or for growth initiatives. Instead, existing shareholders are cashing out, which isn’t a good sign.