Shares of Hertz Global Holdings (NYSE: HTZ) , a vehicle rental company going through the bankruptcy process, soared over 128% Friday afternoon after news spread that the company secured $1.65 billion in funding -- but here's why investors should temper their excitement.
At first glance investors might think Hertz securing $1.65 billion in funding to continue operations during the bankruptcy process would be a good thing -- especially considering the stock price jumped over 128%. But let's first explain what debtor-in-possession financing is, and what it means for investors. Debtor-in-possession financing is only available for companies in bankruptcy. It's used to orchestrate the reorganization and allow the company to raise capital to continue operations while the bankruptcy process continues.
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For further details see:Why the 128% Pop in Hertz Stock Is Absurd