Hertz shares halted after SEC raises issues with plan to sell potentially worthless stock

• Hertz shares were halted on Wednesday morning after the Securities and Exchange Commission said it had issues with the company's planned stock offering.
• The car-rental chain aims to sell as much as $500 million worth of stock in a fundraising effort, though it has said the shares could become worthless through bankruptcy proceedings.
• "We have comments on their disclosure," SEC Chairman Jay Clayton told CNBC on Wednesday, adding that, in most cases, firms with such issues "do not go forward until those comments are resolved."
• Hertz shares were frozen at $1.95, down slightly from Tuesday's close.
• Watch Hertz trade live here.

Trading of Hertz stock was paused on Wednesday morning after the Securities and Exchange Commission alerted the firm to issues it had with a planned stock sale.

The car-rental chain filed for bankruptcy on May 22 and has since seen its stock price trade with outsize volatility as retail traders bet on a miraculous recovery. Hertz's latest fundraising plan involves selling up to $500 million in stock to take advantage of its recent rally. But the SEC has raised concerns about such a sale.

"In this particular situation, we have let the company know that we have comments on their disclosure," Jay Clayton, the chairman of the SEC, told CNBC on Wednesday. "In most cases when you let a company know that the SEC has comments on their disclosure they do not go forward until those comments are resolved."

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Hertz told sale participants in a filing on Thursday that "the common stock could ultimately be worthless" if the firm goes bankrupt, as bondholders and other creditors are first in line to see their cash returned. Selling stock at such a precarious condition is highly irregular.

Shares halted at $1.95, down 0.1% from Tuesday's close. Hertz stock had jumped as much as 21% earlier in the day before the pause.

Clayton said that Hertz was aware of the agency's issues, but he didn't specify whether the firm aimed to continue with the sale before addressing the concerns. The SEC's cautionary statement is relatively normal and doesn't require Hertz to cancel its sale.

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Hertz shareholders could also see their holdings turn worthless because of the New York Stock Exchange. The company received a delisting notice on May 26, four days after announcing its bankruptcy filing. Hertz appealed the notice, and shares will continue to trade publicly pending a hearing with the NYSE.

"There can be no assurance ... whether there will be equity value in the Company's common stock" should it be delisted, Hertz said in a regulatory filing last week.

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