Hertz Global Holdings, Inc. (NYSE:HTZ) is now under the greater protective wing of activist investor Carl Icahn, who disclosed his 8.48% stake in the rental car company on Wednesday. What may be good news for shareholders (the stock rebounded sharply yesterday after the revelation) may be bad news for incumbent Hertz Global Holdings, Inc. (NYSE:HTZ) CEO Mark Frissora, who was under attack by other investors yesterday, including Fir Tree Partners’ Jeffrey Tannenbaum, for what was described on Bloomberg yesterday as accounting and business difficulties.
“They have problems with their accounting, and they have problems with the business. On the business side, they seem to have had trouble managing their fleet. They went to what’s known as a risk fleet a few weeks ago,” said Bloomberg’s Jamie Butters.
As Butters explained, this is the same model that was adopted by both Enterprise and Avis Budget Group Inc.(NASDAQ:CAR) some years back, in which the rental company buys the cars outright, takes care of them, and then sells them on the used car market at opportune times for a good profit. Hertz Global Holdings, Inc. (NYSE:HTZ)’s recent adoption of this model has not gone well, however, and the company has been ill-equipped to handle customer flow, and is saddled with many older vehicles in its fleet.
More troubling still, particularly for investors, is Hertz Global Holdings, Inc. (NYSE:HTZ)’s suspect accounting. The company hasn’t reported any financial results this year, and now claims their results from the past three years can’t be trusted.
While Icahn has not yet made a specific statement regarding Hertz Global Holdings, Inc. (NYSE:HTZ)’s CEO Frissora, he did divulge that he has plans to seek an audience with the board and possibly a place on it, and to discuss the operational challenges, under-performance of the company compared to its peers (Avis’ stock is up 70% this year), and the lack of faith in management.