Hertz Episode shows irrationality of the markets

Hertz Episode shows irrationality of the markets

Car rental company saw its shares rise after filing for judicial settlement and planned new funding; origin lies in the measures of central banks

Hertz Episode shows irrationality of the markets

By Editorial Staff

Hertz, car rental company, recently starred in a unique episode in the U.S. capital market. The company, hit hard by the impacts of the pandemic, saw its stock soar after filing a judicial settlement request in the U.S. And in the face of demand for shares, even without the ability to pay the current debt, it filed a request to raise US$1 billion in shares. This episode shows the irrationality of the markets.

Although it gave up days after making the issuance, the car rental company is still looking for a loan of equivalent value to continue its operations. In a recently recorded video, analyst Fernando Ulrich classifies this fact as the “tragicomic irrational exuberance of markets”.

“Hertz is a zombie company, which means, its operating profit does not pay its interest expense, even in a scenario of years of low interest and abundant money. So this is a mark of the extraordinary measures of central banks in the markets. They have contributed to the irrationality that has taken over the market with stock prices disconnected from corporate fundamentals”, says Ulrich.

Irrationality of the markets is in Transfero’s thesis

It is in this context of disconnection of the fundamentals of companies with the prices of shares that Transfero Swiss considers that cryptossets are a great alternative for diversification of equity. According to the company’s investment thesis, the injection of money since the 2008 crisis artificially raised the stock price of companies that do not present profits, and this may be reflected in the market at some point.