If your investment portfolio still includes any kind of travel company in it, I’m sorry for you. The global pandemic, and the shelter in place orders that have sprung from it, have destroyed every kind of travel and tourism venture. Hertz appears to be the first major domino to fall, having recently filed for bankruptcy protection, while declaring a fire sale on some of their more desirable rentals.
Things couldn’t be worse for Hertz right now. It has furloughed or laid off 20,000 employees, half of its global workforce, due to the pandemic. It’s CEO has resigned. While operations have not been affected globally, it has decided to file for bankruptcy protection to restructure its debts, which began piling up as services like Uber and Lyft chewed into their business over the past few years.
“The impact of Covid-19 on travel demand was sudden and dramatic, causing an abrupt decline in the company’s revenue and future bookings,” Hertz said on May 23. That decline forced the rental company to take “immediate actions to prioritize the health and safety of employees and customers, eliminate all non-essential spending and preserve liquidity.”
Most of the market could see this coming. Hertz had a year to date high share price of $20.85 before the pandemic hit full force, but quickly slid down to $3.38 by March 18. It’s now trading at roughly $2.80.
If you think you’ll find shelter by investing in any other kind of travel company, you’re definitely in the minority. Berkshire Hathaway CEO Warren Buffet has announced he would be ditching airline stocks, selling off shares in both Delta and Southwest. He was previously bullish on both, owning more than 10% of each company.
If you happened to sell off before the rest of the crowd, Hertz’ bankruptcy has one positive for you: cheap luxury cars! Shortly before they announced their bankruptcy maneuvering, the company put up for sale more than 70 Chevrolet Z06 Corvettes, but only a handful remain. These cars normally go for $81,000 to $95,000 on the open market, but Hertz is willing to let them go for as low as $60,000.
Gear head websites are pretty excited about the idea of getting these cars on the cheap, although they do worry that the type of people who rent these cars might have already have done a number to the clutch. I’d be more worried about whatever stains they left on the leather seats.
