Avis shares erase 600% short-squeeze gain as rally fades

Avis Budget Group shares have given back gains from a 600% short squeeze earlier this year, ending a volatile period involving Pentwater Capital Management.

The stock fell as much as 3.5% to $99.20 on Monday. It had briefly climbed above $700 in March after Pentwater disclosed an increase in its Avis stake, prompting short sellers to buy shares to close their positions.

More than half of Avis’ available shares were sold short at the height of the rally. Pentwater later disclosed that it had sold 4.3 million shares. Avis shares then lost 70% of their gains over two trading sessions.

Avis accused Pentwater of contributing to the stock’s volatility. Pentwater agreed to pay $650 million to settle litigation involving short-swing profits, which can arise when certain investors buy and sell shares within a short period.

Avis shares have continued to decline amid weaker conditions for rental-car companies. Inflation, high interest rates, lower international travel demand and disappointing earnings have weighed on valuations across the industry.

Short interest in Avis has fallen to 29% of its public float, down from its March peak, according to S3 Partners. Rival Hertz remains heavily shorted, with short positions equal to 81% of its public float.

Vikram Rai of First New York, who traded Avis during the squeeze, described it as one of his most profitable trades of the year. He no longer holds the stock.