Car rental company Hertz is in bad shape. An inability to pay its debts, related in part to the serious slowdown in rentals and used car sales caused by COVID-19, led the company to file for bankruptcy in late May. Naturally, then, they’re now planning to sell $500 million dollars in new stock, which they predict will be worth nothing at all in the very near future.

Wait, what? Yes, it seems that despite the bankruptcy filing, bored and/or ill-informed investors have been buying up Hertz stock in droves. This has caused the share price to surge in ludicrous fashion from its post-bankruptcy low of $0.40 a share. Rather than sit on the sidelines while other people get rich selling their stock at inflated prices, Hertz now wants in on the action. It’s bold, I’ll give them that.

Aforelinked financial analyst and funnyman Matt Levine has written an epic special edition of his column that covers this whole ridiculous sage in glorious detail. The entire thing is well worth a read, but here’s a brief excerpt:

Imagine writing the prospectus for this offering. Actually in some ways it is nice and clarifying…On the one hand, you don’t have to give investors lavish scary warnings that Hertz might go bankrupt, because Hertz is bankrupt. “We’re in bankruptcy, you dopes, and your stock will probably be worthless”; what more is there to say? The bad thing has already happened; no one who buys this stock can say that they weren’t warned.

On the other hand, you don’t have to give investors a compelling sales pitch for why they should buy the stock, because the whole premise of the offering is that people are irrationally buying the stock already and so they might as well buy it from Hertz. “Hertz: We’ve got some of that Hertz stock you wanted, if for some reason you still want it,” is the entire pitch.

It is a near certainty that Hertz stock will get wiped out, and a whole lot of people will lose their investments. Buyers who are aware of what’s happening are hoping to buy the stock low, quickly sell it at a slightly higher price, and walk away. However, it’s likely that a whole lot of small investors simply have no idea what’s going on. Hertz is trending, Hertz’s share price is jumping, and they can get in on the action.

Whether investors know it or not, with this offering of new stock, Hertz is coming very close to just asking the market at large “Would you like to pay back back our creditors for us?”. That should be a laughable question, and yet incredibly, the answer seems to be “Yes”.