Bill Ackman’s Pershing Square Capital Management has recently made headlines with their bold move to acquire a nearly 20% stake in Hertz Global Holdings Inc. This strategic investment is a bet on Hertz’s turnaround plan and the potential impact of tariffs on the value of its vehicles.
Ackman’s firm began purchasing shares of Hertz late last year, resulting in a significant stake of 19.8% through a combination of outright share ownership and total return swaps. The decision to invest in Hertz is based on the belief that the company can overcome past challenges, such as a failed investment in Tesla electric vehicles, and capitalize on potential increases in used-car prices following President Trump’s tariffs on US auto imports.
The market responded positively to Ackman’s move, with Hertz shares surging by 44% in New York trading, extending a two-day rally that saw the stock more than double in value. Hertz CEO Gil West expressed gratitude for Ackman’s support, acknowledging the progress made by the company while recognizing the need for continued efforts to drive further growth.
One of the key factors driving Ackman’s optimism is the anticipated impact of Trump’s 25% tariff on imported automobiles, which is expected to drive up car prices and subsequently increase the value of used cars. Hertz, with its fleet of over 500,000 vehicles valued at $12 billion, stands to benefit from a potential 10% increase in used car prices, translating to a $1.2 billion gain on its auto assets.
Looking ahead, Ackman envisions a path for Hertz to reach $30 a share by 2029, contingent on achieving West’s targets for revenue per unit, operating expenses, and depreciation. Ackman’s investment thesis also includes a focus on improving fleet utilization to 85%, a level that Hertz has historically struggled to reach.
While Ackman’s investment in Hertz is generating excitement, it is worth noting the cautionary tone he strikes in his post on X. Ackman reminds investors that investing is inherently risky and success is not guaranteed, emphasizing the importance of due diligence and risk management.
Overall, Ackman’s bold move in acquiring a significant stake in Hertz reflects his confidence in the company’s potential for growth and turnaround. As the market continues to evolve, investors will be closely watching to see how Hertz navigates the challenges ahead and capitalizes on opportunities for success.
