Carl Icahn loses $40 million on Hertz’s stock in one day

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Carl Icahn loses $40 million on Hertz’s stock in one day
By Tomi Kilgore
Published: Nov 14, 2014 5:02 p.m. ET
Bloomberg

Being right doesn’t mean making money.
Carl Icahn was right, that Hertz Global Holdings Inc. needed to do something about accounting issues and shareholder value. But being right cost Icahn about $40 million on Friday, and it was almost a lot worse.

Hertz’s stock HTZ, -4.58%  slumped $1.04, or 4.6%, on Friday, after the car rental company said it would have to restate its 2012 and 2013 results, after previously announcing it would only restate 2011 results, as it continues its investigation into accounting issues. The stock bounced sharply in the final three hours of trading, to pare losses of as much as 14% at its intraday low of $19.55.

Icahn Associates, the car rental company’s biggest shareholder, owns 38,800,000 shares, or an 8.48% stake in Hertz.

In a regulatory filing over the summer, Icahn indicated he bought the stock because he thought the company was “undervalued.” But he also said he wanted to speak to Hertz’s board of directors about a host of concerns, including shareholder value, accounting issues, operational failures and a lack of confidence in management.

Hertz’s announcement Friday may vindicate Icahn’s concerns, but at a price. He lost $40.4 million in market value on Hertz’s stock Friday, if his holdings remained the same. At the intraday low, he was down as much as $123 million.

Since Aug. 20, when Icahn’s holding were disclosed, the of Icahn’s holdings have been slashed by $335 million.

Keep in mind that Hertz announced on Sept. 8 that its chairman and chief executive at the time, Mark Frissora, was stepping down “for personal reasons,” and said on Sept. 11 that it would add three Icahn representatives to its board of directors.

But Icahn isn’t the only one that believes Hertz will be able to turn things around. Analyst Christopher Agnew at MKM Partners said Friday that after a meeting with management, he was impressed with their understanding of the Hertz’s issues and with their roadmap on how to deal with them.

He reiterated his buy rating on Hertz’s stock. His $33 price 12-month target implies a 52% gain from current levels.