NEW YORK, Nov 9 (Reuters Breakingviews) - Hertz Global has had a phenomenal recovery from its pandemic woes. After going bankrupt in 2020, the rental car company has inked a $20 billion valuation, including debt, in its stock deal, which priced on Monday. A rise in travel and a corresponding surge in the shares of rival Avis Budget (CAR.O) helps justify Hertzs price. But a car shortage restrains growth, and ride-sharing is still a secular threat, and Hertz is now worth slightly more than it was in 2019. It has helped that travel returned so rapidly that rental car companies were working overtime. Avis Budgets market capitalization has ballooned to $16 billion, thanks to a nearly eightfold increase in its stock price over the past 12 months. It has an enterprise value of roughly 3 times 2021 estimated sales, according to Refinitiv. Hertz had about $5 billion of revenue in the first nine months of the year, a third more than last year but about half what it was in the total year for 2019. Assuming it grows sales at the same pace as Avis, it would be valued at a third less than its peer, suggesting that the price it fetched was fair. The trouble is that before the Covid-19 pandemic, Aviss multiple was around half what it was today. Some parts of the industrys picture are improving. Electrification and better software could help cut costs, and some investors might even believe that someday rental car firms could reinvent themselves to be delivery companies. But the industry has the same challenges, too. Car rental has always been a highly competitive business, with low margins. Any advantage, from say stocking Teslas read more , is likely to be copied. Moreover, ride-sharing firms like Uber Technologies (UBER.N) are likely to keep chipping away at peoples need to rent cars. That suggests that sales might struggle to grow, and even if they do, the two firms valuations could still easily revert to historic levels. In that case, Hertzs new listing will look wheels off.

Hertz Global shares began trading on Nasdaq on Nov. 9, after some existing post-bankruptcy backers agreed to sell 44.5 million shares at $29 each. That was at the top of the indicated price range and at an 11% discount to the closing price on Nov. 8 in over-the-counter trading. Hertz filed for bankruptcy in May 2020. The company emerged in June after a group composed of Certares Opportunity, Knighthead Capital Management and Apollo Global Management injected $5.9 billion of equity.

1. Summarize this issues link with strategic management accounting? What is the Hertz Global stock price situation at that time? explain.