TLDR
- Bill Ackman’s Pershing Square bought a 19.8% stake in struggling Hertz, becoming the second-largest shareholder
- Hertz stock jumped 126% in two days following the announcement
- The car rental company posted a $2.9 billion loss in 2024, largely due to EV investment missteps
- CEO Gil West expressed encouragement about Ackman’s investment in an internal message to employees
- Hertz has been working to recover after emerging from bankruptcy in 2021 and is now focusing on a turnaround strategy
Bill Ackman, the billionaire investor and head of Pershing Square Capital Management, has taken a significant stake in Hertz Global (HTZ), sending the car rental company’s stock price soaring. The news was revealed in a regulatory filing on Wednesday.
Pershing Square disclosed a purchase of 12.7 million shares in Hertz worth $46.5 million at the time of purchase. This stake has since grown to 19.8% through shares and swaps, making Ackman’s firm the second-largest shareholder in the company.
The market reacted strongly to the news. Hertz shares jumped a staggering 126% in a two-day span following the announcement.
Prior to Ackman’s investment, Hertz had lost nearly 90% of its value over the last three years. The company has faced numerous challenges, including a bankruptcy during the COVID-19 pandemic in 2020.
The EV Gamble That Failed
After emerging from Chapter 11 bankruptcy protection in 2021, Hertz made a large bet on electric vehicles, particularly Teslas. This strategy backfired badly.
The EV investment led to an asset impairment of $1 billion. When reporting its 2024 fourth-quarter earnings in February, Hertz revealed a $2.9 billion loss for the year.
This included a $245 million loss on the sale of electric vehicles during the fourth quarter alone. The company has since completed the sale of 30,000 EVs that were part of the failed strategy.
Hertz is now shifting focus to its business turnaround plan under CEO Gil West, who took the helm in April 2024.
Leadership Response
In an internal message to employees on Friday, CEO Gil West expressed optimism about Ackman’s investment in the company.
“Let me start by saying I am humbled, and we should all feel encouraged by Bill Ackman’s comments and energized by the strong support shown by him, Pershing Square Capital Management, and others who share confidence in our strategy,” West wrote.
“This endorsement is a testament to our progress, and the relentless effort each of you contributes every day,” he added in the weekly CEO message viewed by CNBC.
West described Ackman’s stake as a “significant position” in the company. He also reaffirmed his belief in Hertz’s potential.
“When I joined this company a year ago, I saw its potential clearly—and continue to see it every step of the way. There’s no doubt this journey hasn’t been easy, and the path ahead won’t be easy either,” West said.
Hertz is the second-largest car rental company in the world behind Enterprise. The company brought in $9.05 billion in revenue last year.
However, revenue declined in 2024, falling 3.4% year over year. This drop was partly related to the company’s strategy of keeping fleet capacity below demand to maximize revenue per unit (RPU).
The company’s revenue-per-unit declines have narrowed from 7% in the first quarter of last year to 1%, showing some signs of improvement.
The car rental sector has traditionally been challenging for investors. The industry now competes with ride-sharing options like Uber and Lyft.
Interestingly, Pershing Square also took a large stake in Uber Technologies earlier this year. Combined with the Hertz investment, this seems to indicate Ackman’s increased interest in the transportation sector.
Ackman has not publicly commented on his reasons for investing in Hertz. The purchase fits with his pattern of betting on beaten-down big-brand stocks, similar to his previous investments in Chipotle and Nike.
At $46.5 million, the initial investment represents a relatively small stake compared to Pershing Square’s assets under management of $18.3 billion.
The investment comes at a time of uncertainty in the stock market. Hertz has historically been sensitive to economic cycles since it depends on business travel and tourism.
Some forecasters expect international tourists to reduce visits to the U.S. due to trade tensions, which could impact the tourism sector, including Hertz.
Despite these potential headwinds, Ackman’s vote of confidence has breathed new life into the stock. Investors will be watching closely to see if Hertz can continue its recovery under this new chapter.
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