With Hertz emerging from a bankruptcy with a positive result for shareholders, we are reminded of the interplay between the equity markets and the bankruptcy alternative.

Some firms facing financial challenges during the pandemic were able to avoid a bankruptcy filing altogether because of their ability to raise the necessary funds through an equity offering. Hertz provides an example of a situation where the bankruptcy filing instead of wiping out the equity enhanced value.

If appropriate disclosures can be made, an equity offering may negate the need for the bankruptcy filing. In any event it is an alternative that should be considered.

"The competition for control of Hertz drove up its value so sharply that it was able to cover its debt in full and supply a handsome payout to shareholders, who are normally wiped out when companies go bankrupt. After the bankruptcy exit, Hertz shares will continue to trade over the counter, though the controlling investors are considering relisting on a stock exchange eventually, people familiar with the matter said."