The U.S. Bankruptcy Court for the District of Delaware granted Hertz approval on Friday to sell up to $1 billion in stock.
Hertz said in the filing that the net proceeds would be used for general working capital purposes.
“The recent market prices of and the trading volumes in Hertz’s common stock potentially present a unique opportunity for the debtors to raise capital on terms that are far superior to any debtor-in-possession financing,” Hertz said in the filing.
The move is raising eyebrows in the investment community.
It’s common for companies in bankruptcy to obtain debtor-in-possession financing, said research analyst Dilantha De Silva in a post on Seeking Alpha.
“It is, however, revolutionary to even think about raising capital from equity markets after filing for Chapter 11 as it's no secret that most of these companies eventually cancel existing common shares in their reorganization plans, leading to a permanent loss of invested capital,” he wrote.
At the time of commencing bankruptcy, Hertz had close to $20 billion in debt.
Hertz shares have skyrocketed about 300% since May 26, the first day of trading after it declared bankruptcy. Hertz shares closed Friday up 37% to $2.83 a share.
There has been a surge in users of the popular Robinhood trading app in the last couple of months. Shares shot higher on Friday of airlines, cruise lines, and companies that have been popular with investors on Robinhood, a day after stocks suffered one of the worst one-day market retreats of the year.
Hertz's stock sale comes as it fights to keep its stock from being delisted on the New York Stock Exchange, which sent a letter to Hertz on May 26 regarding commencing proceedings to delist.
Hertz is requesting a hearing before the NYSE to contest the potential delisting.