Published On: Mon, Sep 1st, 2014

Troubled Hertz Attracting Activist Investors

 

Hertz

Hertz (HTZ) is going through a world of hurt with recalls from General Motors (GM) and having to withdraw its 2014 guidance. This is not repelling, but rather,  is attracting activist investors like Carl Icahn who bought a 8.48% stake in the company. When an otherwise good company stumbles, activists want to jump in and transform the company. Around the same time as Icahn bought a stake, hedge fund Fir Tree Partners purchased 3.1% of Hertz, and said, “We are quite puzzled to read  Hertz’s assertion that ‘they have a good handle on the nature and scope of the issues’ given how many times the company bungled forecasts in the last year and the shocking lack of financial statements. It’s clearly time to move past denial and swiftly install great leadership for a great company like Hertz. We stand ready to help.”

While the stock price has tripled in 5 years, the company has been seeing headwinds lately. Hertz is planning on splitting its car rental and equipment rental businesses, and while such spin-offs often create value, it has tied up the company. The stock was hit hard when management announced in August it was withdrawing its guidance, and the stock was downgraded by Piper Jaffray. While the analyst expressed confidence in the management of CEO Mark Frissora and said problems were short-term, Jim Cramer, of CNBC’s Mad Money put Frissora on his “Wall of Shame” and said Hertz’s stock would rise 10 points if the CEO departed. As long as Frissora is at the helm, said Cramer, “Avis doesn’t have to try harder.”

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