Hertz Stock Nosedives as Bankruptcy-Exit Plan Threatens to Wipe Out Holders

Under Hertz’s restructuring proposal, shareholders will receive no distribution, meaning they will receive no recovery from the proposed deal. Hertz said it plans to be a private company when it leaves bankruptcy. The car-rental company, one of many companies deeply wounded by the coronavirus pandemic, filed for bankruptcy protection last May.

But unlike many companies whose businesses suffered due to stay-at-home restrictions, Hertz’s story took on new life after individual investors piled into the stock. In an event that preceded the GameStop Corp. phenomenon, individual investors sent shares of Hertz soaring over several days early last June after the company entered chapter 11 proceedings.

In the trading session following Hertz’s filing for bankruptcy protection, shares crashed to 56 cents. They then surged above $5.50 less than two weeks later—a nearly 900% rally. In the days after, however, shares tumbled. They have since largely traded below $2 this year before finally sliding below $1 Wednesday.

Hertz’s eye-popping rally last year was one of the earliest signs of the growing force of individual investors in the stock market—though the saga also highlighted how frenzied and speculative retail investing can be. Even in the months after the sharp rise and decline of Hertz shares, many individual investors continued to discuss and tout the stock online, with some predicting that the company could make a comeback.

A lawyer for Hertz acknowledged last year that the shares “might ultimately be worthless” around the time that the car-rental company sought to sell more stock in the wake of the rally. Hertz ultimately raised millions of dollars before suspending the stock sale once the Securities and Exchange Commission said it had questions about the offering.

Hertz’s restructuring proposal requires approval from the U.S. Bankruptcy Court in Wilmington, Del., and could be challenged by creditors and investors, including junior bondholders. Under the proposal, Knighthead Capital Management LLC, Certares Management LLC and other co-investors would pay between $2.3 billion and $4.2 billion for a controlling equity stake in the rental-car company. Hertz hopes to exit chapter 11 by the end of June.

Hertz is traded on the over-the-counter market. Last fall, its stock was delisted from the New York Stock Exchange.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com