Ackman’s Stake in Hertz: A Gamble on Turnaround or a Strategic Masterstroke?

Hertz’s recent pivot toward transparency, as outlined in CEO Gil West’s internal letter to employees, reveals a critical turning point for the beleaguered rental car giant. The April 2025 disclosure of Pershing Square’s 19.8% stake—amassed quietly through an SEC exemption—has reignited investor speculation about whether Bill Ackman’s involvement signals a calculated bet on Hertz’s recovery or a risky wager on an industry in flux.

The Stake and Its Immediate Impact
Ackman’s stake, confirmed via an April 17, 2025, X post, triggered a 120% surge in Hertz’s stock, briefly pushing shares above $8.22—a stark contrast to its penny stock status earlier that year. The move leveraged Pershing Square’s ability to delay disclosure under an SEC exemption, allowing it to accumulate 19.8% ownership through shares and total return swaps. This positioned Ackman as Hertz’s second-largest shareholder, surpassing figures like Carl Icahn.

The CEO’s letter to employees framed the stake as validation of Hertz’s strategic progress. West emphasized that Ackman’s investment reflects confidence in the company’s “Back-to-Basics” plan, which prioritizes fleet discipline, cost management, and operational metrics like Depreciation Per Unit (DPU) below $300, Revenue Per Unit (RPU) above $1,500, and Direct Operating Expenses (DOE) in the low $30s. These targets are framed as critical to long-term sustainability.

The Elephant in the Fleet: EVs and Financial Woes
Hertz’s struggles are no secret. A $2.9 billion loss in 2024, driven largely by a $245 million write-down on its EV fleet, underscores the risks of its aggressive post-bankruptcy strategy. The purchase of over 100,000 Teslas and other EVs—once hailed as visionary—backfired as Tesla’s price cuts cratered residual values. By late 2024, Hertz was offloading EVs at fire-sale prices, such as a 2023 Tesla Model 3 for $17,913, to stave off further losses.

Ackman’s letter to shareholders, however, reframes this narrative. He argues that Hertz’s fleet—now being rotated to reduce high-cost EVs—could regain value if tariffs on imported autos, like those proposed under the Trump administration, boost used-car prices. A 10% increase in used-car values, he claims, could add $1.2 billion to Hertz’s fleet valuation, nearly doubling its then-$2.5 billion market cap.

The Bulls vs. the Skeptics
Ackman’s optimism is tempered by Wall Street’s caution. As of early 2025, analysts assigned a “Moderate Sell” consensus to Hertz, with an average price target of $2.93—implying a 30% downside from April’s post-stake highs. Critics cite lingering risks: Hertz’s $2.9 billion debt pile, its history of bankruptcy (2020), and a rental industry still grappling with oversupply and price wars.

Yet Ackman’s track record as an activist investor—such as his turnaround of Wendy’s and his 2020 bet on GameStop—suggests he’s not merely speculating. His $30-per-share target by 2029 hinges on operational execution and macro tailwinds, including fleet utilization hitting 85% and EBITDA rising to $2 billion.

The CEO’s Playbook: Metrics Over Momentum
West’s letter underscores a return to fundamentals. He stresses that Hertz’s global scale—500,000 vehicles and extensive real estate—provides a platform for recovery. The CEO’s focus on DPU, RPU, and DOE aligns with Ackman’s emphasis on cost discipline and asset optimization.

However, the path remains fraught. First-quarter 2025 results showed疲软 demand, with revenue growth lagging peers like Enterprise Holdings. Analysts also question whether tariffs alone can offset Hertz’s structural challenges, such as its reliance on seasonal demand and competition from disruptors like Uber.

Conclusion: A High-Stakes Gamble with a Silver Lining
Ackman’s stake in Hertz represents both a vote of confidence and a high-risk bet. The CEO’s internal letter highlights a strategic pivot toward operational rigor, but the company’s history of missteps and industry headwinds loom large.

Key data points paint a mixed picture:
- Near-term: Analysts’ $2.93 price target reflects skepticism about Hertz’s ability to stabilize.
- Long-term: Ackman’s $30 target by 2029 assumes a 10% used-car price surge and $2 billion EBITDA—a stretch, but not impossible if fleet management improves and tariffs materialize.
- Balance Sheet: Hertz’s $2.9 billion debt is manageable only if cash flows stabilize, which depends on achieving those operational metrics.

While the stock’s 2025 surge was fleeting—retreating to $5.20 by mid-year—the strategic partnership with Ackman has injected urgency into Hertz’s turnaround. Whether this translates to sustained value hinges on execution, macro conditions, and whether the “car-as-asset” thesis can outpace its past failures. For now, investors are left to weigh whether Hertz’s fleet truly holds the keys to a $30 future—or if it’s another chapter in a long story of overambition.