Ackman's Hertz Gamble: Can Pershing Square Turn Around a Car Rental Giant?

The sudden revelation that Bill Ackman’s Pershing Square had amassed a 19.8% stake in Hertz Global sent shockwaves through the market, driving the company’s stock up 56% in a single day. This bold move by one of Wall Street’s most notorious activists underscores a bet on Hertz’s ability to rebound from years of turmoil—and highlights the risks and opportunities in a sector many once wrote off.

The Stake, the Surge, and the Strategy

Pershing Square’s stake, disclosed via an SEC filing in early 2025, was built incrementally. Initially reported as a modest 4.1% position in late 2024, the firm leveraged an SEC exemption to delay filings, allowing it to quietly accumulate shares and swaps. The 19.8% stake, now second only to Hertz’s founder, marks Ackman’s largest single investment in years—and a direct vote of confidence in CEO Gil West’s turnaround plan.

The stock’s surge wasn’t just about the stake’s size. Investors read it as a signal that Ackman, who famously survived the 2020 GameStop saga, sees $30 per share by 2029—a 260% upside from its post-rebound price of $8.50. But what’s driving this optimism?

Tariffs, Fleets, and Tesla’s Fallout

Ackman’s thesis hinges on three pillars:
1. Tariff Tailwinds: Hertz locked in its 2025 fleet purchases before recent U.S. auto import tariffs, positioning its $12 billion fleet to benefit from rising used-car prices. A 10% jump in used-car values could add $1.2 billion to Hertz’s valuation—a windfall for a company with a market cap of just $5.2 billion.
2. Operational Turnaround: Under West, Hertz is replacing high-depreciation vehicles with cheaper models, aiming to cut depreciation costs to $300 per unit. The goal is to hit $1,500 in revenue per unit, up from $1,200 in 2024.
3. Debt Stability: Despite $6 billion in debt, most maturities are delayed until 2028–2029, giving Hertz breathing room.

The Elephant in the Parking Lot: Tesla’s $245M Write-Down

Hertz’s struggles aren’t just hypothetical. Its disastrous $2 billion bet on Tesla EVs—purchased en masse post-bankruptcy—backfired as residual values collapsed and customers flocked to gas-powered cars. By 2024, Hertz had sold 30,000 EVs at steep discounts, booking a $245 million loss in Q4 alone. The EV fleet, once a bold pivot, now haunts the balance sheet.

Ackman’s solution? Move past EVs. He argues that Hertz’s fleet flexibility—500,000 vehicles globally—gives it an edge over rivals like Enterprise and Avis. But can management execute this shift while navigating union disputes and rising labor costs?

The Uber Gambit: A Long Shot, or a Game-Changer?

Ackman has hinted at a partnership with Uber, leveraging Hertz’s fleet to boost utilization via ride-sharing. While still speculative, the idea isn’t baseless: Pershing already owns a 3.6% stake in Uber, and Hertz’s 11,200 global locations could serve as charging hubs for self-driving fleets.

Risks and Realities

The skeptics have points. Hertz’s 2024 $2.9 billion net loss underscores its fragility. Even with tariffs boosting fleet values, near-term profits remain elusive. Ackman admits Q1 2025 results will be “subdued,” with challenges including first-half fleet turnover and macroeconomic uncertainty.

Moreover, Hertz’s stock trades at 23x earnings post-rebound—a steep multiple for a company still losing money. If tariffs don’t materialize or fleet values stagnate, the $30 target could look overly optimistic.

Conclusion: A High-Reward, High-Risk Play

Ackman’s bet on Hertz is a classic activist play: a leveraged company with a mispriced asset (its fleet) and a management team willing to overhaul operations. The $2 billion EBITDA target by 2029 is ambitious but mathematically plausible if used-car prices rise and costs are slashed.

Yet history looms large. Carl Icahn’s 40% stake in 2014 ended in disaster during Hertz’s 2020 bankruptcy. Ackman’s success hinges not just on tariffs, but on execution—reducing debt, stabilizing margins, and avoiding another misstep like the Tesla gamble.

For investors, Hertz is now a call option on both Ackman’s track record and the auto industry’s shifting tides. The upside is vast, but so are the potholes.