Bankruptcy Stocks in 'Terrible Bubble,' Jim Cramer Says

DanKuhn14

A tale of two bankruptcies…and two very confusing stocks?

Hertz and Chesapeake energy have been trading at heavy volumes as of late, both tempting and confusing investors across Wall Street. As of Tuesday morning, both stocks plunged lower with Hertz down over 10% premarket and Chesapeake down nearly half its share price.

Both companies have caught investor attention as of late as they grapple with the impact of the coronavirus pandemic and its subsequent economic shutdown.

Hertz filed for bankruptcy protection June 5, noting that the pandemic overwhelmed the car rental company’s ability to meet its long-term credit agreements. "With the severity of the COVID-19 impact on our business, and the uncertainty of when travel and the economy will rebound, we need to take further steps to weather a potentially prolonged recovery,” Hertz president and CEO Paul Stone said in a statement.

Chesapeake Energy appears to be in a similar boat, reportedly preparing to file for Chapter 11 bankruptcy protection as it attempts to cope with the 40% plunge in crude oil prices.

Despite the dire situation, investors continue to pile in and out of the stocks, prompting Jim Cramer to tweet a warning to stay away from the stocks. 

Jim Cramer said these stocks are in a "terrible bubble" and at the end of the day when the bankruptcy hearings come and pass, they could be worth "nothing." 

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