It's immoral for Alice to sell cigarettes to a minor, and it is also immoral for Reynolds to do so, so the analogy doesn't work.
Since, uh, nobody has an issue with regular stock holders selling their shares to other stock holders.
If Bob is not 'sophisticated' enough to be allowed to buy shares of Hertz regardless of who is selling them, then sure, prevent him from buying. Delist the stock. Require you to be an accredited investor to buy shares of a company undergoing bankruptcy. These are all reasonable solutions to the problem. Stopping Hertz from selling shares... Is not. Because if Bob is an informed/sophisticated/accredited investor, then Hertz selling him shares isn't actually defrauding him.
Just like RJ Reynolds and Joe Camel, the Hertz management knew that their share offering was targeted at investors ill equipped to make a rational decision.
It is bad faith and fraud.
The prevalence of the “it’s just the market” argument and corresponding ethical gap here is disturbing. Read the Ben Horowitz “why I didn’t go to jail” post that was reposted earlier this week. End of the day, everyone who signed off on the Hertz offering decided to paper over an obvious moral hazard with sophistry and bullshit to enrich themselves (via bonuses) and bondholders by defrauding the public.
So, why is Alice selling her shares to Bob, who is clearly an idiot for paying good money for shares in a bankrupt company not a trade made in bad faith?
In fact, if Hertz sells enough shares, they are no longer bankrupt - which actually makes buying their shares with the intent to hold a rational decision. That's not why Bob is buying them, though, he's buying them because it's a meme stock, and he, I guess, wants to buy meme stocks. He not so unsophisticated that he fails to understand that Hertz is a shitty company.
Why are we protecting him from Hertz, but not from Alice?
Since, uh, nobody has an issue with regular stock holders selling their shares to other stock holders.
If Bob is not 'sophisticated' enough to be allowed to buy shares of Hertz regardless of who is selling them, then sure, prevent him from buying. Delist the stock. Require you to be an accredited investor to buy shares of a company undergoing bankruptcy. These are all reasonable solutions to the problem. Stopping Hertz from selling shares... Is not. Because if Bob is an informed/sophisticated/accredited investor, then Hertz selling him shares isn't actually defrauding him.