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Bankrupt Hertz to seize on speculation frenzy with $1 billion stock sale

Hertz Global Holdings Inc said it won bankruptcy court approval on Friday to sell up to $1 billion in stock, capitalizing on a remarkable rally in its shares driven by speculators defying conventional market wisdom, Trend reports with reference to Reuters.

Hertz’s shares have risen 250% since June 4, even though their value is likely to be wiped out by the end of its bankruptcy process as creditors take over the U.S. car rental company. The shares soared as much as 680% earlier this week.

Investors, many of them amateur traders who use apps such as Robinhood, are betting on how high they can push the stock before it collapses. Record savings, stimulus checks, low interest rates and even lockdown boredom in the wake of the coronavirus outbreak have all been cited by market pundits as possible explanations for the extraordinary move.

The stock sale could benefit creditors seeking to recover more of their claims during the bankruptcy process. Hertz said in court filings that it would disclose to investors in the stock offering that the shares could “ultimately be worthless.”

“Hertz is acting as if it wasn’t bankrupt,” said UCLA Law School professor Lynn LoPucki. “The market thinks there’s equity in this company.”

Hertz, which had roughly $18.8 billion in debt at the end of March, is one of the largest companies so far to be undone by the coronavirus pandemic, which has crushed the travel industry.

Hertz is not the only U.S. company in bankruptcy whose shares have soared in recent days. J. C. Penney Company Inc, Chesapeake Energy Corp and Whiting Petroleum Corp have also seen similar rallies.

Hertz, which filed for bankruptcy protection on May 22, was among the most popular companies on the Robinhood app used by mom-and-pop investors earlier this month.

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Amazon moves to stock more non-essential items — but it’s not business-as-usual Inc. will slowly increase the assortment of products that can be shipped to its warehouses this week, easing restrictions instituted in March that prioritized essential goods such as medical supplies, groceries and pet food amid the pandemic.

It’s far from a return to normal operations for the online retailer, which was overwhelmed by demand from shoppers avoiding stores and had to abandon its quick delivery promises. Still, it’s a sign that Amazon is able to accommodate a larger assortment of goods after hiring 100,000 workers and announcing plans to hire 75,000 more. Further details about specific products being accepted and quantities will be shared with Amazon’s merchant partners in the coming days.

“Later this week, we will allow more products into our fulfillment centres,” Amazon said in an emailed statement. “Products will be limited by quantity to enable us to continue prioritizing products and protecting employees, while also ensuring most selling partners can ship goods into our facilities.”

The move was reported earlier by the Wall Street Journal.

In prioritizing toilet paper, bleach and sanitizing wipes over things like flat-screen televisions and toys, the company focused on delivering products people need right now, sacrificing sales from its deep inventory for the time being.

More than half of all products sold on Amazon come from independent merchants who pay Amazon commissions on each sale plus fees for storing, packing and delivering products. Merchants selling in-demand products saw a nice sales bump from swift changes in customer demand while those in the out-of-favour categories watched their sales tank.

While Amazon wasn’t accepting new shipments of goods it deemed non-essential, workers in warehouses around the country said they continued to shelve and ship non-essential items like kickballs, bedsheets and books as well as restock returned items. That generated tension because some workers said they felt Amazon could further restrict the products it sold to better protect warehouse workers. Dozens of employees have contracted the coronavirus, and protests have erupted in New York, Chicago and outside Detroit.

Groceries and household essentials as well as bread machines, home fitness equipment and computer monitors were among Amazon’s fastest-growing products in March, according to the online retail research firm Stackline. Luggage, cameras and party supplies were among the categories that saw the biggest sales drop last month.

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