Or more generally:
- How can a firm that files for bankruptcy still be traded?
- What is a bankrupt firms worth?
Disclaimer: I am a complete noob regarding these topics and I probably miss already some basic underlying understanding of these terms. So here is how I understand it and why I can't wrap my head around it:
- Hertz filed for bankruptcy. (what does that really mean? They won't be able to pay money they owe to some third parties, right? Like employees, creditors, etc..). They still need to pay as much as possible, right? My crude understanding is: when X files for bankrupcy, they basically declare they won't be able to pay back everything but they do pay as much as they can - after that I would expect X to be gone and nobody can expect anything more from X. Creditors have to take the hit. I would have also expected the company to cease the business, but one can still rent a car at Hertz...
- So why is Hertz still being traded? Owning shares, AFAIK, is basically that I own part of the company, right? But if they owe to creditors and employees, won't the shareholders be payed back last, with what is left? But if they owe more than they can pay, doesn't that mean that the shareholders will get nothing back for their stock?
- This now begs the question: what are the people buying stock betting on? That Hertz will be able to pay back more than expected? That they can get out of bankruptcy?
Now, clearly Hertz is still being traded and for a short moment it still went up. So I must be misunderstanding something or missing a point - what does it mean for a bankrupt company to be undervalued? What's a bankrupt company worth? (All the fundamentals are "negative" right?)
Can someone maybe shed some light on this topic for me? Or point me to the right sources on what are the underlying concepts I am misunderstanding?