Rental car giant Hertz was a shell of itself before emerging from bankruptcy earlier this year, but on Monday it flashed the latest sign of a rapid turnaround by placing an order for 100,000 pricey new Teslas to add to its fleet.
Markets viewed the deal as good for both firms, but the biggest winner may be the electric carmaker’s mercurial CEO, Elon Musk, who inched closer to becoming the world’s first trillionaire.
From Hert to Spurt
The Covid pandemic hit Hertz hard last year when it halted traveland car rentals dried up. On top of that, the company had just spent big bucks on Detroit muscle, leaving it with less gas in the tank than rivals Avis and Enterprise which remained solvent.
But fortune did a U-turn in 2021: Travel rebounded and a new investment group took Hertz out of bankruptcy with a $5.9 billion investment, the company lined up another $10 billion in loans while reducing its corporate debt by 80%, and sold 200,000 vehicles just as used car prices skyrocketed.
The Tesla deal has sparked Hertz’s fortunes:
- The more than $4 billion order will deliver snazzy, environmentally friendly Tesla Model 3 sedans over the next 14 months, making a fifth of its global car fleet exhaust-free.
- In trading Monday, Hertz shares were up 7.3% to $26.50.
“Since there is a lot of focus on [the environment] from investors, having 20% of your fleet being electric gives Hertz a stronger ESG investment narrative potentially than others in car rental,” said Hamzah Mazari, a Jefferies analyst, in an interview with Barron’s.
Elon-gated: A week after Morgan Stanley predicted he’ll be the world’s first trillionaire, the net worth of Tesla’s CEO and the world’s richest man Elon Musk got a quarter of the way there on Monday. At $252 billion, he’s worth almost $60 billion more than runner up Jeff Bezos. Meanwhile, Tesla stock was up 6.7% to $969 and its market cap passed $1 trillion for the first time.