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Hertz Global Holdings, Inc. (HTZ): Carl Icahn Raising Activist Stake Signals Long-Term Prospects for Stock

As a new filing with the Securities and Exchange Commission shows, activist investor Carl Icahn has further raised his exposure to Hertz Global Holdings, Inc. (NYSE:HTZ). The investor raised his stake to almost 49.29 million shares of the company, from 38.80 million shares held earlier. Following the increase, Mr. Icahn holds 10.77% of Hertz’s outstanding common stock.

Hedge Fund Strategies

Mr. Icahn’s involvement in Hertz Global Holdings, Inc. (NYSE:HTZ) will certainly bring a substantial long-term value for other shareholders as well. The investor initiated a position in the company in August as it was struggling because of some accounting problems that have been discovered earlier this year and a lowered guidance impacted by several big car recalls that happenned this year. Mr. Icahn initially held 8.48% of the company and went activist by asking the board to nominate three independent directors. In addition, together with other shareholders, Carl Icahn urged the board to consider removing former CEO Mark Frissora, who stepped down, but for personal reasons.

Recently, Hertz has hired a new CEO, John P. Tague, who has also been approved by Mr. Icahn. The investor said via Twitter that he believes that Hertz has hired “an excellent CEO.” The decision, however, might not have been received so good by another activist investor that stepped up after Mr. Icahn. Barry Rosenstein of JANA Partners sent a letter to Hertz Global Holdings, Inc. (NYSE:HTZ)’s board at the beginning of November, proposing the former CEO of Dollar Thrifty (a car rental company acquired by Hertz) Scott Thompson as a candidate for the CEO position. JANA Partners holds a 7% stake in Hertz, which contains 32.03 million shares including options.

So, even though Hertz Global Holdings, Inc. (NYSE:HTZ)’s stock is still down by 13% since the beginning of the year, the confidence of activist investors such as Carl Icahn and Barry Rosenstein is a signal that the company has good prospects in the long run. So far, however, investors haven’t been very confident about the company’s future. Our data show that during the third quarter, the number of funds that own shares of Hertz decreased by 22 to 83 funds out of over 700 that we track at Insider Monkey. Nevertheless, many of the investors that are still holding shares of the company have raised their exposure to the stock, as the aggregate value of the stakes held by these 83 funds went up by $589.54 million to $6.16 billion. Jeffrey Tannenbaum’s Fir Tree is one of the investors that earlier this year backed Carl Icahn in asking the board to remove the CEO and it raised its position by 31% during the third quarter to around 18 million shares.

Overall, Mr. Icahn has an excellent track record of activism that has had a positive impact on shareholder value at different companies. Earlier this year he initiated a position in Family Dollar Stores, Inc. (NYSE:FDO) and urged the board and management to sell the company, which resulted in a merger with Dollar Tree, Inc. (NASDAQ:DLTR), which has not been closed yet, though. However, with Hertz Global Holdings, Inc. (NYSE:HTZ) the situation is more complicated as the company is still trying to clear the mess with its accounting and Mr. Icahn still has a lot of work to do to convince the market and set the stock on a rebound track. So far, analysts have not been very confident on Hertz, as the stock still has a consensus rating ‘Hold’ and several analysts such as Deutsche Bank and Morgan Stanley have lowered their target prices to $22.00 and $16.00 respectively.

Disclosure: none

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