Hertz Global Holdings Inc (HTZ)

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What your saying is virtually true but let’s look back on how all this came to be. Payables and the suppliers who hold the debt on the payables often except common shares for there equity position on the debt too pay the tax credit owed when there debt on there equity comes due. This allows the private sector to take part in the public common market place. It also allows the tax debt coming due to be sold off. Let’s take a large vehicle supplier too Hertz that is supplying a million in vehicle financing and carrying a twenty five percent tax credit on those vehicles of $250,000 .

By issuing the common shares to the supplier and inturn them selling there interest on the open market both the buyer and the purchaser have leveraged there tax exposure selling it to the general public. So how does the general public recoup there capital making it fair to all involved ?

They end up holding a portion of the receivables ie: tax debt

So where is the up side for the common investor. It’s hidden in the spread between all the debt and assets held taking in the risk of the receivables into account.

As we have seen the risk in a pandemic falls into a positive position putting the common shareholders into a very risky situation that they will loose everything. The upside is they can’t loose more then they have initially invested ie: stock market protection.

It’s a gamble but the up side could be huge relative to the inevitable down side facing the company and its equity holders.