Shares climb 800% after a judge rules them worthless—which firm?

The Pandemic Crash That Kept Going

Hertz Global Holdings filed for Chapter 11 bankruptcy protection on May 22, 2020, after the COVID-19 pandemic obliterated travel demand and left the company unable to make lease payments on its 650,000-vehicle fleet. The Estero, Florida–based giant had been struggling with $19 billion in debt even before lockdowns emptied airports and rental counters worldwide. CEO Paul Stone had warned creditors in late April that without relief, bankruptcy was inevitable. Within days of the filing, the company's stock price sat at around 40 cents, down from $20 in January.

Bankruptcy law typically wipes out equity holders completely, leaving shareholders with nothing after creditors are paid. The market had priced Hertz shares accordingly, and every textbook said they were worthless paper. Then something unprecedented happened: retail investors on platforms like Robinhood began buying the stock in massive volumes, treating bankruptcy as a buying opportunity rather than a death sentence. The company appeared on Robinhood's top-ten most-held stocks list by early June, alongside Apple and Tesla, signaling that hundreds of thousands of amateur traders had opened positions.

The 800% Rally Built on Nothing

The frenzy accelerated through late May and early June 2020, driven by commission-free trading apps, stimulus checks, and online forums where novice traders shared tips and memes. Hertz shares climbed from 56 cents on May 26 to over $5.50 by June 8, an 800% gain in two weeks. Daily trading volume exploded to ten times the pre-bankruptcy average, with millions of shares changing hands as day traders bet the company would somehow emerge intact. On June 8 alone, more than 200 million shares traded hands, making it one of the most actively traded stocks in America despite having no fundamental value.

The euphoria ignored basic bankruptcy mechanics: in a Chapter 11 restructuring, existing shares are almost always cancelled, and any equity in the reorganized company goes to creditors, not old stockholders. Financial commentators watched in disbelief as the market cap of a bankrupt company briefly topped $1 billion. CNBC's Jim Cramer devoted multiple segments to warning viewers away, calling the trade "gambling, not investing." Even the bankruptcy judge, Mary Walrath, expressed concern during hearings about unsophisticated investors losing money, but the warnings only seemed to fuel more buying as contrarian investors assumed they knew something the establishment didn't.

The Billion-Dollar Gambit That Almost Was

Hertz management, watching this irrational exuberance, saw an opportunity that no bankrupt company had seriously attempted before: why not sell new shares into the frenzy and raise cash? On June 12, 2020, the company filed a remarkable motion with the bankruptcy court seeking permission to issue up to $1 billion in new stock, even though those shares would likely be worthless once the restructuring concluded. Investment bank Jefferies agreed to serve as underwriter for the offering, which would have been the first major equity raise by a bankrupt company in modern financial history.

The proposal stunned bankruptcy lawyers and set off immediate debate about the ethics of selling shares in a company that had just declared insolvency. Hertz argued the cash could help fund operations and reduce creditor losses, essentially transferring wealth from willing day traders to institutional creditors. The SEC, which had been monitoring the situation, initially allowed the plan to proceed but required enhanced risk disclosures warning buyers they would "lose their entire investment." Within days, mounting pressure from consumer advocates and Congressional Democrats led the SEC to reverse course, and Hertz withdrew the offering on June 17 after raising only $29 million in test sales.

The Aftermath and Lasting Impact

The Hertz stock eventually collapsed back below $2 by July 2020 as reality set in and the trading mania moved to other targets. The company exited bankruptcy in June 2021 after creditors accepted a restructuring plan that eliminated $5 billion in debt. Existing shareholders were indeed wiped out entirely, receiving nothing, exactly as bankruptcy experts had predicted. Former equity holders who bought during the spike lost hundreds of millions of dollars collectively, with no recourse or compensation.

The episode prompted regulatory scrutiny of gamified trading apps and their role in encouraging risky behavior among inexperienced investors. Robinhood added in-app warnings for bankrupt stocks in late 2020, and FINRA issued guidance to brokers about their obligations when customers trade distressed securities. The incident became a case study in business schools about market inefficiency, irrational exuberance, and the dangers of social-media-driven investing. It also previewed the meme stock phenomenon that would explode with GameStop and AMC in early 2021, demonstrating that coordinated retail traders could temporarily override traditional market valuations, even when buying assets with no intrinsic value.