New York City, NY – Renowned investor Bill Ackman has made a bold move by acquiring a nearly 20% stake in Hertz Global Holdings Inc., a major rental car company. Ackman’s Pershing Square Capital Management venture into Hertz is driven by his belief that impending tariffs could drive up car prices significantly, as he shared in a recent social media post.
Amidst the acquisition, Hertz’s shares saw a substantial 44% surge in New York trading on Thursday, marking a noteworthy two-day rally where the company’s stock doubled in value. Ackman’s strategy for Hertz is rooted in the expectation that the company can overcome previous challenges, particularly a misstep involving Tesla Inc. electric vehicles, and seize the opportunity presented by a potential uptick in used car prices due to President Donald Trump’s tariffs on US auto imports.
The 25% tariff on imported automobiles, imposed by President Trump, is predicted to increase car prices by thousands of dollars, potentially boosting the value of used cars – especially newer models in limited supply. Ackman highlighted Hertz’s advantage in this tariff environment, noting the company’s fleet of over 500,000 vehicles valued at approximately $12 billion. He projected that even a modest 10% increase in used car prices could yield a significant $1.2 billion gain on Hertz’s auto assets.
Looking ahead, Ackman envisions a path for Hertz to reach $30 per share by 2029, contingent upon meeting specific targets set by CEO Gil West. These goals include achieving $1,500 in revenue per unit, maintaining daily per-vehicle operating expenses in the low $30-range, and managing depreciation per unit at around $300. Additionally, Pershing’s optimism for Hertz relies on the company achieving an 85% fleet utilization rate, a level that Hertz has not historically reached consistently.
While Ackman’s bold move has sparked interest, it is worth noting that legendary investor Carl Icahn previously made a similar bet on Hertz, which eventually led to the company filing for bankruptcy, causing Icahn to suffer significant losses. Ackman, however, remains confident in his strategy for Hertz, despite acknowledging low expectations for the company’s Q1 and first-half results.
In a futuristic twist, Ackman mused about the potential for Hertz’s global locations to manage a fleet of self-driving vehicles for Uber Technologies Inc., hinting at a potential partnership. He concluded his reflections with a reminder to investors about the inherent risks involved in investing, emphasizing the absence of guarantees for a successful outcome.
