Latest News

Avis Budget shares reach record highs as bearish bets are crushed by short squeeze

Analysts pointed out that a short squeeze has caused investors to suffer steep losses if they bet against the stock.

Data analytics firm Ortex reported that as of Monday, 86.2% (or 86.2%) of Avis free floated shares had been shorted. This is just shy of the all-time high of 89.3%, which was recorded in March. Short interest is high, which makes stocks more susceptible to a "short squeeze" as short sellers are forced to unwind their positions if the stock price increases sharply.

Avis shares rose more than 23 percent on Monday, and short sellers suffered losses of nearly $1.01 Billion. In morning trading on February 2, its shares rose?6.4% to $647.7.

Barclays analysts stated that "we believe the rapid increase in the share price of 'CAR over the last?month was driven almost exclusively due to technical factors which have led to a large supply/demand mismatch for the shares, with short sellers facing a severe squeeze."

Avis shares are owned by two large firms. Data compiled by LSEG shows that hedge funds SRS Investment Management, Pentwater Capital Management, and a combined total of 25.2 million shares are held by two firms. This is more than 71 percent of the outstanding shares.

Pentwater Capital, according to a filing made earlier this month has increased its stake in Avis from?more then 7.8 million to more than 8.8 millions shares, reducing the float by a significant amount.

SRS Investment and Pentwater Capital did not immediately respond to requests for comment.

Avis shares have seen a similar rally before, in 2021. Stocktwits' retail investor forum currently ranks the stock as the second-most popular ticker.

Barclays downgraded Barclays' stock from "equal weight" to "underweight" on Sunday, stating that the current stock price is not justifiable even with improved fundamentals.

Deutsche Bank analyst Chris Woronka?downgraded stock from "buy" to "hold" in the same month for similar reasons.

Avis reported in February a decline in revenue for the quarter and a loss of $856m. (Reporting by Shashwat Chauhan in Bengaluru; Editing by Shilpi Majumdar)

(source: Reuters)