Hertz’s mom and pop investors face a bankruptcy process not designed for them

Individual stock traders looking to cash in winning bets on Hertz Global Holdings Inc. find themselves in uncharted territory as the company exits Chapter 11, finding themselves in a bankruptcy process that favors the interests of larger investors and richer.

All Hertz shareholders will be paid upon exiting the company from Chapter 11, receiving a mixture of cash, securities in the reorganized company and the right to purchase shares in the future. By Friday, they must choose from several choices involving the right to purchase additional shares, with their options determined by eligibility standards related to personal wealth.

Shareholders weighing the various decisions include day traders who bought Hertz shares when they were cheap last year, at the height of the coronavirus pandemic. Some are family investors who do not meet the criteria to participate directly in any of the stock purchase programs, although they may sell their participation rights to qualified investors.

Other investors are struggling to understand their options and have said they can’t get clear answers from the company or their own advisers. Some said they felt left behind in a bankruptcy exit process that had not been developed with amateur investors in mind.

Hertz’s situation is unusual given the dramatic upturn in its outlook in recent months. Shareholders rarely count when a company goes bankrupt because there is usually not enough value to pay off creditors, who must be fully satisfied before equity. Hertz, however, estimated that shareholders will receive a payment of $ 7 to $ 8 per share, according to court documents.