To be clear, it is not a stock offering. Certain owners have found a buyer for a significant amount of their shares. They are not selling through a registration statement which would make it an "offering." They have also indicated they will be selliing additional shares, albeit through what mechanism is not thusfar disclosed.
The shares have had an extraordinary run and the sellers must be construed as sophisticated since their positions appear to have been initiated at significantly lower prices. While this does not mean it has topped out, one would be wise to evaluate what is motivating these sellers at this time and whether the greater fool theory applies to those who would buy now after this big move.
I need to revise my prior post. Pursuant to their 8-K filing, JPM is the purchaser and the underwriter. This opens the door to some additional possibilities.
It is now entirely possible that JPM set up for the offering (these things are not concluded in a single phone call or meeting) by establishing a significant short position and thereby hedged their risk by the use of the short as means of covering into any disaffected shares coming into the market on the private funds disposition news. This is legalized insider trading and happens all the time. They know about the big seller but the rest of the market doesn't and pre-establish hedges to avoid the prospect of losses outside the underwriting fee they receive.
Given how the stock is trading, I would put that scenario on the scale of highly likely. To me, it trades like there is a stabilizing force in the market, i.e., JPM. This tactic is employed to accomplish the appearence of exactly what it sounds like - stabilization.
Less likely, is that JPM took the shares in for its own account, was happy with the fees it received and will hold on to 50MM shares until they can make a profit on it because the market is going to move the shares higher. My thinking now, is that once JPM covers its short, the stock heads lower, how much is anybody's guess.
Clayton Dubilier & Rice, The Carlyle Group and BofA Merrill Lynch each held 10.5-11.5% of Hertz outstanding shares prior to their recent sale. Post secondary, they reduced their combined position to 26%. Since Hertz's largest institutional holders have telegraphed their intent to reduce their positions, it is reasonable to assume that they will continue selling shares, as conditions permit, next year. The net effect is to place a soft ceiling of $ 16-$16.30 on the stock.The dilemma for shareholders..... if Hertz management exceeds the street's expectations, resumed selling by the top three will limit the stock's price appreciation. Conversely, disappointing results will have the obvious effect on share price. Bottom line, until the large negative share overhang is cut to 10%-12% the risk/reward is decidedly biased to the downside regardless of company performance. Company officers appear to recognize this reality, since 4 have sold nearly 3 million shares over the past several months.