Hertz Global has asked a bankruptcy judge to approve a deal to sell up to 246.8 million unissued shares, up to $1 billion, to Jefferies even as impending liquidation threatens to wipe out their value.

Hertz shares jumped to as high as $5.53 after the filing before falling to under $3 by Friday afternoon. The stock closed at 56 cents on May 22.

“The recent market prices of and the trading volumes in Hertz’s common stock potentially present a unique opportunity for the debtors to raise capital on terms that are far superior to any debtor-in-possession financing,” the company said in its filing.

The New York Stock Exchange has moved to delist the company, but Hertz is appealing the notice.

Hertz made the filing on an emergency basis, “given the volatile state of trading” in its stock. The company is also seeking permission from the bankruptcy court to break leases for more than 144,000 automobiles.

“Hertz looks at the market and sees there is a group of irrational traders who are buying the stock, and the response to that is to seek to sell stock to these people in hopes of raising some amounts of money to fund their restructuring,” said Jared Ellias, a professor at the University of California Hastings College of Law.

Ellias said he has never seen a company attempt an equity offering like Hertz’s in the hundreds of bankruptcies he has studied.

Hertz has about $3 billion in corporate bonds that were trading at around 40 cents on the dollar this week. It said proceeds from the sale would be used as general working capital.

Shares of more than a dozen companies in bankruptcy have jumped almost 50% on average in recent weeks, according to data from Investor’s Business Daily. Hertz, JCPenney, Pier 1, and Diamond Offshore are among the volatile stocks.

A hearing in the bankruptcy court in Delaware is expected Friday afternoon.

Cindy Ord/Getty Images

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