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    Avis gives back all of its 600% short-squeeze rally driven by Pentwater

    The rental car stock touched $99.20 on Monday, back where it was before the spring squeeze, and S3 Partners puts short interest at 29% of float.

    HedgeWeekly Hedge Fund Desk ·

    Avis Budget Group has now surrendered the whole of this year's 600% short-squeeze rally, Bloomberg reported on 19 October. The shares slid as much as 3.5% on Monday to $99.20, returning to levels last seen before the squeeze, which started in late March and peaked in April at a 52-week high of about $714.

    The surge began after Pentwater Capital Management disclosed it had added to an already large holding at a time when more than half of Avis's thinly traded float was held short, forcing bears to buy back stock. The move reversed abruptly in late April: Bloomberg reported a roughly 70% collapse over two sessions, and Pentwater later disclosed it had sold more than 4.3 million shares. Avis sued Pentwater to recover short-swing profits, and the fund agreed in June to pay $650m to settle; Avis said in a securities filing that it received the cash on 5 October.

    The latest leg down reflects weaker fundamentals, including inflation, higher interest rates and fuel costs, softer international travel and Avis's poorest quarterly results in more than two years. Short interest in Avis has dropped to 29% of float from its spring peak, according to S3 Partners, while 81% of Hertz's float is still sold short. Vikram Rai of First New York, who traded the squeeze, called it one of his best trades this year and has since exited.

    Why it matters: the round trip shows how fast a crowded short and a concentrated long can unwind in both directions, and Pentwater's $650m payment shows the legal cost of crossing the 10% ownership line in a volatile name. With most of Hertz's float still shorted, positioning in rental car stocks remains a risk for funds on either side of the trade.

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