Shares Of Hertz Plunge On More Accounting Troubles
Hertz Global Holdings, a favorite stock in recent months of some closely-watched hedge funds, disclosed on Friday morning that its audit committee had concluded that problems with the company’s financial statements for the last three years must be corrected to reflect mistakes.
Shares of Hertz tumbled by 10.8% in early morning trading to $27.19. The stock had recently surged as investors of the car rental company anticipated its split into two companies by next year. Specifically, the company said its 2011 financial statements were no good and must be restated, and that its 2012 and 2013 financial statements need to be fixed.
Hertz’s stock has been popular with prominent hedge fund investors. As of the end of March, some of its biggest shareholders included billionaire Larry Robbins’ Glenview Capital Management, billionaire James Dinan’s York Capital Management, Jeffrey Tannenbaum’s Fir Tree and billionaire Dan Loeb’s Third Point. It is unclear to what extent those hedge funds still remain in the stock today.
“The audit committee has directed the company to conduct a thorough review of the financial records for fiscal years 2011, 2012 and 2013, and this review may require Hertz to make further adjustments to the 2012 and 2013 financial statements,” Hertz said in a Securities & Exchange Commission filing. “If these further adjustments to the 2012 and 2013 financial statements are determined to be material adjustments individually or in the aggregate, Hertz will need to also restate and withdraw reliance on those financial statements.”
Hertz had already delayed filings its first quarter financial statements last month after identifying errors related to its capitalization and timing of depreciation for non-fleet assets, allowances for doubtful accounts in Brazil and other items. It also found problems related to allowances for uncollectible amounts with respect to renter obligations for damaged cars. Previously this year, the company found $46.3 million in out-of-period accounting mistakes in the past three years.
Hertz said its financial results for the first quarter of 2014 will be impacted by the costs of the accounting review and “other unusual items,” likely driving its results below consensus estimates. Hertz said total U.S. rental car revenue per day dropped by 1.6% compared with last year, citing excess fleet and issues involving the introduction of its Firefly discount brand.
Source: forbes
