Bill Ackman’s Pershing Square Capital Management has acquired a nearly 20% stake in Hertz Global Holdings Inc. in a wager on the rental car company’s restructuring plan and the potential increase in vehicle value due to tariffs.
The firm started purchasing shares towards the end of last year and currently holds “a 19.8% stake in the company consisting of direct share ownership and total return swaps,” Ackman mentioned in a post on X.
Ackman is betting on Hertz overcoming a failed investment in Tesla Inc. electric vehicles and benefiting from a possible surge in used-car prices due to President Donald Trump’s tariffs on US auto imports. The success also hinges on Hertz CEO Gil West effectively managing the company’s significant debt and executing an ongoing turnaround strategy.
Hertz stock soared by 44% in New York trading on Thursday, continuing a two-day surge during which the stock more than doubled in value.
West, in his usual Friday update to Hertz employees this week, expressed gratitude for Ackman’s support.
“This validation demonstrates our advancement, and more importantly, the unwavering dedication each of you contributes daily,” West wrote in an email, according to a person close to the company. “We should take pride in the progress we’ve made but acknowledge that there is still considerable work ahead.”
Trump’s 25% tariff on imported automobiles is anticipated to drive up car prices by several thousand dollars if it remains in place for an extended period. This could lead to an increase in the value of used cars—particularly late-model vehicles in short supply—as consumers priced out of the new-car market turn to pre-owned vehicles.
“Hertz is exceptionally well-placed in the current tariff environment,” Ackman noted in the X post. “Hertz owns a fleet of over 500,000 vehicles valued at around $12 billion. A 10% rise in used car prices would translate to a $1.2 billion gain on its auto assets—roughly half of the company’s current market capitalization.”
Ackman envisions a path for Hertz to reach $30 per share by 2029. Prior to this week’s surge, Hertz shares were trading for less than $5. Achieving this target depends on meeting West’s goals of reaching $1,500 in revenue per unit, maintaining daily per-vehicle operating expenses in the low $30 range, and keeping depreciation per unit at around $300.
Pershing’s calculations also rely on Hertz achieving an 85% fleet utilization, a level the company has rarely attained and historically been closer to 80%.
Ackman is not the first finance giant to see potential in investing in Hertz. Billionaire investor Carl Icahn also saw an opportunity with the rental car company. However, Hertz declared bankruptcy and Icahn walked away with a $1.6 billion profit.
In the short term, Ackman anticipates “we have low expectations for Hertz’s Q1 and first half results.”
Analysts covering the company share this sentiment. Six of them rate the shares as hold equivalents and four recommend selling the stock, according to data compiled by Bloomberg.
Ackman also offered some futuristic ideas for investors and his followers on X. He mentioned the possibility of Hertz—with its 11,200 global locations—operating a fleet of self-driving vehicles for Uber Technologies Inc. He joked that he would reach out to Uber CEO Dara Khosrowshahi.
In response, Khosrowshahi stated in a post on X that Hertz has been a “great partner” of his company, referring to a collaboration since 2021 to offer benefits to rideshare drivers who rent electric vehicles through Hertz. Khosrowshahi added that he is “excited to collaborate on expanding our relationship.”
Ackman concluded his post with a caution.
“Investing is risky,” he stated. “There are no guarantees of a successful outcome. Caveat emptor.”
This story was originally featured on Fortune.com
