Trading in shares of Hertz was halted Wednesday pending news around the bankrupt company's controversial stock sale plan.
The stoppage at 11:44 a.m. ET follows the Securities and Exchange Commission telling Hertz that the regulator has issues with the rental car company's plan to sell stock while in the middle of bankruptcy proceedings.
"In this particular situation, we have let the company know that we have comments on their disclosure," SEC Chairman Jay Clayton said Wednesday on CNBC's "Squawk on the Street." "In most cases when you let a company know that the SEC has comments on their disclosure they do not go forward until those comments are resolved."
The shares were trading down about half a percent to $1.94.
This the latest in a string of recent developments with Hertz, which filed for bankruptcy on May 22. In a public filing with the SEC last week Hertz said that it had appealed a delisting request by the NYSE. Later in the week, it disclosed plans to launch a questionable stock sale as a last ditch effort to raise capital even though the value of the shares could get wiped out.
Hertz filed for bankruptcy last month as demand for car rentals dried up as travelers have stayed home during the coronavirus pandemic. The stock hit a low of 40 cents intraday on May 26. But in the days that followed, the shares began to recover and eventually surged to more than $6 per share last Monday.
Following the increase, Hertz asked the bankruptcy court Thursday to allow it to sell up to $1 billion in shares. The request was approved by the court Friday.
Hertz said in a government filing Monday that it would sell up to $500 million in common stock. It warned potential investors that it's almost certain that the equity will become worthless.
Such a sale is highly unusual for a company going through Chapter 11 bankruptcy proceedings since common shareholders, who are last in line when assets are allocated during court proceedings, may be left with worthless stock.
The court, in its ruling, said the approval "in no event will result in the issuance" of the shares. The debtors are authorized, but not required, to sell shares of the common stock.
Trading activity in names like Hertz has spiked on millennial-favored stock trading app Robinhood in the days following the bankruptcy filings, according to Robintrack, which tracks Robinhood account activity but is not affiliated with the company.
– CNBC's Maggie Fitzgerald contributed to this report
