# Summary of my Bear Case
* The high short interest led to a spectacular rally following Bill Ackman's fund announcement of a 4.1% stake in the Hertz.
* Bloomberg just announced (April 25) that the company is looking to raise $500 million through debt or (and this is key) **equity**.
* I believe the company will dilute investors at the start of next week. That will probably lead to a selloff (like it is usually the case, after an equity offering).
* I'm planning to buy OTM puts, with a price target of $5 over the next 2-3 months. I am not a degen (despite my profile name), so I need theta to be on my side, baby!
* I believe Hertz could be cooked. Revenue is down, despite decent utilization rates. That means the company is renting cars at lower prices to keep demand.
* Tariffs will most likely not improve its vehicle's residual values, as Trump may pause sectoral tariffs on autos.
* Airlines have recently reported a decline in air travel. Considering that 65% of the company's revenue comes from airport locations, that is another headwind to consider.
* Overall, I believe the AI / robotaxi infrastructure nonsense is not alligned with the company's simplification strategy. I have big doubts Bill Ackman will be able to pursue management into this business venture.
# Fundamentals
Both Americas and International revenues are down, yoy.
https://preview.redd.it/etiyipbsy5xe1.png?width=1600&format=png&auto=webp&s=858fb1e84fd69f7a1ac5106d8a8e50dec9f91fbf
Here is the yoy variation:
Americas:
* Q4 2024: -7.5%
* Q3 2024: -5.1%
* Q2 2024: -4.3%
* Q1 2024: 0.5%
International:
* Q4 2024: -2.1%
* Q3 2024: -3.2%
* Q2 2024: 0.7%
* Q1 2024: 7.6%
Overall, worldwide vehicle rental revenue is down by -3.4% yoy in FY 2024. Big drop compared to the 20.6% increase in FY 2023 or the 56% increase in FY 2022.
From a profitability perspective (EBIT**DA),** things look raw (to say the least). Just look at the trend below. By the way, that's earnings **BEFORE** depreciation.
https://preview.redd.it/yfum8bbvz5xe1.png?width=1600&format=png&auto=webp&s=adf99de745f069c965942d41baf0997f2631b31c
When taking into account DEPRECIATION, things look even more raw.
https://preview.redd.it/7rvznrpb06xe1.png?width=1600&format=png&auto=webp&s=6d37b1679a22a66b3926e71d7b03328b10d05086
What's the company doin' about this?
**Buy Right, Hold Right, Sell Right** strategy --> Back to Basis roadmap
Here's a summary:
|Metric|Year-End 2023|Year-End 2024|Target by YE 2025|
|:-|:-|:-|:-|
|% of fleet ≤ 1 year old|(not disclosed)|60 %|Substantially complete rotation\*|
|Average cap cost of “risk” vehicles vs. existing|(not disclosed)|\~ 30 % lower|Maintain or improve cost advantage|
|Vehicles sold (Q4)|\~ 30,000|100,000 (+ 230 %)|—|
|Depreciation per unit (DPU), net|Guided $350–375|Actual $347 (**gross**)|< $300/month/unit|
On the **Buy Right** strategy. From the Q4 earnigns call:
>*Our risk vehicles … have an average cap cost almost 30% lower than our existing fleet of model year ’22 through ’24 car buys*
In plain English: Compared to the cars they bought in 2022–2024, the new cars (for 2025) cost 30% less on average.
>*We've got committed model year '25 buys locked in at the economics that foot to that \[sub-$300 DPU\] metric*
What is the DPU: depreciation per vehicle per month. In plain English: how much a vehicle looses value per month due to depreciation.
The thing is. $300 DPU is not a sneeze. Take a look at the DPU trend below.
https://preview.redd.it/29pt5fsn16xe1.jpg?width=1600&format=pjpg&auto=webp&s=dca0fbbb37791873434c76c3bac93f67ce890b15
Does that look scary? It seems that the depreciation in the US is way more pronounced than in the EU.
Here's the deal, baby! The median of the "total DPU" since 2019 was **$253**. Things changed after the pandemic, you may say. Fair enough. Here is the median of the "total DPU" (total meaning both US and International cars) since Q1 2022: **$284.**
Let me be clear. The target of <$300 per month is only bringing back the company to the base line after the pandemic. That baseline is still high compared to pre-pandemic levels.
On their **Hold Right** strategy: A car’s biggest value drop happens in the first 1–2 years. But if Hertz keeps cars very new (fleet mostly < 1 year old), depreciation per month becomes predictable and lower.
From the earnings call:
>As of year-end 2024, over 60 % of our fleet was comprised of vehicles 1 year old or less.
On the **Sell Right** strategy:
In Q4 2024 alone, they sold 100,000 vehicles, compared to just 30,000 in Q4 2023. Less than 10% sold in auctions (lower prices) and they are prioritizing their retail selling channel (higher prices due to add-ons, like financing).
Management is bullish on tariffs:
>If tariffs … increase new car prices, the counterbalance is likely residual values will go up, which will help our business model
I am not. Here is why: Trump is chickening out of sectoral tariffs on autos after CEOs complained. Check recent news on this topic. I am seemingly now allowed to post links.
# The Bear Case
Here is a strong pillar of my bear case:
Take a look at utilization rates over past few years. Notice the seasonality, which is 100% normal.
https://preview.redd.it/bcf0lr3436xe1.png?width=1600&format=png&auto=webp&s=3b0a2aebc330d934d53fae0d818fc911c4e1cfdb
WTF is the utlization rate? In plain English: how much a vehicle is being rented (i.e. generating $$$) during the quarter. 80% utilization rate means that 4 out of 5 days, the car is rented out. Not bad, right! The trend looks fine. Here is the yoy variation in utilization rates:
* Q4 2024: 1.3%
* Q3 2024: -1.2%
* Q2 2024: -2.4%
* Q1 2024: -1.3%
The trend (when adjusted for seasonality) is flat, which is great... or is it?
Take a look at the trend in total revenue per transaction day. In other words, how much HTZ is makin' per vehicle per day, on average, during the quarter, both in Americans and Intl.
https://preview.redd.it/7hyrezlc46xe1.png?width=1600&format=png&auto=webp&s=9ecfb3a484a174c1df90c2b79f018844b9b16d45
The trend looks raw.
Here's the thing: to keep the same utilization rates (in other words, to keep their vehicles rented out), the company has to lower the daily rates to maintain demand. Here is the seasonally adjusted variation in revenue per transaction day in 2024:
* Q4 2024: -2.4%
* Q3 2024: -0.7%
* Q2 2024: -3.2%
* Q1 2024: -6.9%
Speaking of raw trends, here is a chart showing interest expenses over the past few years:
https://preview.redd.it/xlk85vyg56xe1.png?width=1600&format=png&auto=webp&s=0821c8360c6c43e7b94c95bc8bd2133570ba4115
Here is the yoy variation in interest payments:
* Q4 2024: 19.3%
* Q3 2024: 9.3%
* Q2 2024: 26.1%
* Q1 2024: 33.3%
Here is an interesting chart of the nearest debt maturities:
https://preview.redd.it/xxvnuo6f66xe1.png?width=1989&format=png&auto=webp&s=72a60c34a893796fb3625247abe615fb04ddf7e0
# The Pershing Square Deal
Bill Ackman's fund owns now 4.1% of HTZ. Possibly the first step of an activist campaign to influence management on the direction of the company. (when they reach 5% ownership, the fund must file either a 13D or 13G).
Morgan Stanley teased the AI case for the company. To my eyes, BS. Here is why:
It seems that the Street is bullish on autonomous vehicles (i.e. robotaxis) requiring "downstream fulfillment infrastructure" that could be implemented at HTZ rental locations.
Look. Hype works when the S&P 500 is hitting all time highs. Now, hype it's not a good bet. Tesla's robotaxies are operating on Tesla's own infrastructure. Same for Waymo. Hertz would need to burn a lot in CapEx to adapt their rental locations to accommodate robotaxis' operations. Not bullish, in my view.
Here is another reason I am sketched out by the rally. And this, is the final pillar of my bear case:
According to Bloomberg, Hertz Global Holdings is looking to raise $500M through additional debt **or equity offering.** This is key. This is a rumor. It's not officially announced by the company. There is no 8-K filed yet.
My point: if the company dilutes investors now that the share price is up (which is quite common, just look at quantum stocks in Q4 last year), that will lead to a selloff. Simple as that.
# Technical Analysis
https://preview.redd.it/vg9z3lcgd6xe1.png?width=1835&format=png&auto=webp&s=aeaf686fe9ab05d86ec2358cfd089ad0b97e7aae
# Position
I haven't bought puts yet. I may do on Monday, depending on price action and if the company files an 8-K with their potential offering before the market opens.
The Jun 20, 2025, $7 put contract looks juicy:
https://preview.redd.it/e3i3bz6wd6xe1.png?width=1189&format=png&auto=webp&s=82370ce7d4bf8cc2f06bdd99c4389a71eef6f1d2
# Disclaimer
I'm a degen. This is not personal investment advice. Do not follow my bets. Information may be wrong. Do your own analysis.