Analysis: Why We Still Think Hertz Has an Undisclosed SEC Investigation


After a busy day for Hertz yesterday, we visit on our note first published in June and again explain why we think this company is almost certainly under investigation by the SEC.  Yet the company remains silent on this. 

We again recommend those with an interest in Hertz should insist the company speak to what, if any, communications it’s had with the SEC’s Division of Enforcement anytime in the past year. 

Until this comes out, assuming we are correct in our analysis, we believe investors remain vulnerable to yet more negative surprises from this company. 

Facts of Interest or Concern:

There was a multi-year accounting related restatement in June that surprised investors.

Busy day for Hertz yesterday --

  • Earnings miss & the sharp drop in the share price
  • Announcement of a stake taken by Carl Icahn
  • Even CNBC’s Jim Cramer added Hertz CEO Mark Frissora to his “Wall of Shame”

This prompted an overnight announcement from the company that stated, in part, “The Hertz Board and leadership team value the views of all Hertz shareholders and welcome a constructive dialogue with them.”

Our Take:

Apparently, a “constructive dialog” does not include disclosure of what we think is an almost-certain involvement of SEC enforcement officials.  Nothing was said about that in the overnight announcement.  Here’s why we think the SEC matters here (some of these are excerpts from our June note) –

  • Restatements of the multi-year accounting variety that surprise everyone are catnip to SEC enforcement officials.
  • SEC pressure can cause extended pressure on a company and deliver repeated negative surprises to investors.  Yesterday seems to support this view.
  • Hertz’s behavior regarding its last disclosed SEC investigation left a lot to be desired.  The record shows Hertz fully waited until Feb-2012 to disclose its last SEC investigation which it knew was formal as early as June-2011; a delay of 7 months.  That matter pertained to the company’s proposed business combination with Dollar Thrifty Automotive Group, Inc.

To learn more on our process and what our findings mean, click here.

Note:   New SEC investigative activity could theoretically begin or end after the date covered by this latest information which would not be reflected here.