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Hertz offering roars ahead
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April 25, 1997: 8:05 p.m. ET
Shares of car rental giant surge on first day of trading on Wall Street
From Correspondent Fred Katayama
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NEW YORK (CNNfn) - Shares of Hertz Corp. surged after the world's biggest car rental company made its market debut on the New York Stock Exchange Friday.
Ford Motor Co. spun off an 18.5 percent stake in Hertz, which dominates the airport business, in an initial public offering that raised more than $400 million. Priced at $24, shares jumped $4 at the open and finished up 3-5/8 to close at 27-5/8. Hertz was among the most active stocks and led the percentage gainers with a 15 percent climb on the NYSE.
The company is the first pure stock play of a major rental operation, since most of its rivals are part of conglomerates.
"The IPO market right now is very weak. However, when you have a deal this size and this level of recognition, a blue chip company, generally, companies like this can supersede market conditions," said Ryan Jacob, new issues analyst for IPO Value Monitor.
With more people traveling, more cars are being rented -- fueling profits at companies like Hertz. But automakers like Ford are selling their rental car units.
Team Rental recently issued additional shares of stock to fund its purchase of Budget Rent a Car Corp. from Ford.
A handful of new owners have recently taken over the wheel at rental car companies. The Big 3 automakers once bought them as a place to dump their excess inventory, but that glut is down, so they're divesting.
"The auto companies have closed this excess capacity, are now making better product and simply don't have a lot of extra cars they can offer at low prices to this distribution channel. People like Henry Silverman or Wayne Huizenga will make those businesses more rationally structured," said John Casesa, auto analyst for Schroder Wertheim.
Wayne Huizenga bought Alamo and National Car Rental System, while Henry Silverman's real estate company, HFS, bought Avis from General Motors.
And there is more action ahead as Avis is expected to go public this fall and Chrysler has put Dollar and Thrifty on the block.
For now, profit-minded owners are pumping up rates. Consumers pay 5 percent more to rent a car today than they did in January, and rates could head even higher. 
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