Carl Icahn recently lost $179 million after investing in Hertz Global Holdings NYSE: HTZ. The ailing company was not supposed to be an instant turnaround. However, since he bought the stock in 2014, Icahn is unable to reap any profits. Now, he will either have to absorb the loss and move on or simply wait for a profitable quarter.
Icahn’s Relationship with Hertz Global Holdings NYSE: HTZ
Hertz Global, a rental car company, caught Icahn’s attention in 2014. The company’s shares were down by 90 percent at the time, sparking an opportunity of value investment. Icahn even went on to say that the shares had been undervalued. However, 3 years down the line, he might want to rethink his confidence in the company. Bloomberg reports suggest that his stake in the company amounts to $375 million now.
At the end of 2014, when his association had just started, the shares were worth $1.3 billion. Since then, he doubled the number of shares he held but valuation went down steeply. Icahn holds 29.3 million shares of the company. He has a 35 percent stake in the company and is its largest shareholder as well. He bought new stock in the company in November 2016. In just six months, valuation of this stock has slumped by $179 million.
The CEO of Hertz Global Holdings NYSE: HTZ, Kathryn Marinello is struggling to maintain the company. In her guidance, the company started to upgrade their fleet in Q1 2017. However, the ailing company finds this a difficult task as the fleet is sedan-heavy and costs will be higher. The biggest problem with the company, right now, is the lack of earnings guidance. This is making the investors bounce back as nobody knows when the company will overcome its losses. With a sheer lack of data, Icahn is left with two tough choices.
The easy way out of the situation would be selling his stake in the company. However, given the lack of quantification of company’s earnings, he may have a tough time doing so. The second choice would be to hold the investment and let the CEO work on the company. This may also mean that he could buy more stock in the company.
As Icahn bought shares of the company during its downfall, it seems unlikely that he will sell his shares after the loss. He will like to wait for the CEO to turnaround the company and show signs of growth. He did the same when the company missed its previous earnings forecast by a broad margin. Instead of selling the stock, he bought more of it. He was also instrumental in bringing Marinello as the company’s CEO, hoping for a turnaround. None of his objectives have been realized yet.