Avis’s 4x Short Squeeze Is a Gift. Can Management Cash It In?

Avis Budget (CAR) shares have surged by almost 340% over the last month and rose by almost 13% in Thursday’s trading, driven by a short squeeze.

Sure, the rally has been spectacular. But for the company and its management, the “why” matters far less than the “what next.”

They have been handed a rare, volatile window to convert a technical anomaly into a real-world financial turnaround.

How Did It All Go Down? 

The setup began in February, when a federal funding lapse left TSA officers working without pay. Security lines stretched 3 to 4.5 hours at major hubs, including Atlanta and Chicago, pushing travelers toward road trips. Avis, with more than 10,000 locations globally, was a direct beneficiary. Hertz Global (HTZ) also benefited, with its stock up 65% over the last month.

Hedge fund Pentwater Capital had been accumulating Avis stock and in-the-money call options while the stock traded under $100. In late March, around a major options expiration, Pentwater exercised a large block of options, forcing the delivery of millions of shares and sharply reducing the available float. With roughly half of all tradeable shares already sold short, and another fund, SRS Investment Management, owning just under half the company, that float was already thin. Pentwater ultimately built a 22% stake as of the end of March. ^[1]

Short interest stood at 54% of the free float as of the end of March, making Avis the most heavily bet-against stock in the Russell 1000, with a days-to-cover ratio of approximately 7.3. This means that it would take 7 days of average trading volume for shorts to cover their bets. Forced to cover, short sellers bought back shares in volume. Retail traders followed.

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Does Avis Actually Benefit?

Here is the question most coverage ignores: Does a squeeze leave the underlying company better off?

Cautiously, yes, in Avis’s case, for one reason. Avis entered 2026 in a precarious position. It had over $25 billion in debt, a near-billion-dollar net loss, and barely $500 million in cash. Flat revenue growth offered no organic way out.

However, management is now using the squeeze as an equity lifeline via an At-the-Market (ATM) offering. This allows them to sell up to 5 million shares directly into the market. At the peak of this squeeze, those shares would represent a $2 billion plus cash infusion. Sure, it’s small in the context of overall debt, but the company can retire a meaningful chunk of high-interest debt and turn this squeeze into a small, yet permanent, improvement in the company’s financial health.

What Should Investors Watch?

Two things.

First, valuation. Avis currently trades at well over 110x forward earnings – not justified for an asset-heavy car rental business growing at 1% to 2% annually. To be sure, the stock may move higher still in the near term on technicals, but the gap between price and fundamental value eventually tends to close, and for Avis, that will not end favorably.

Second, Pentwater’s position. When the roughly 22% stake begins to unwind in earnest, the scarcity that drove the rally should reverse. More shares re-enter the float, short sellers find stock easier to borrow, and buying pressure subsides. Regulatory filings will show the first signs.

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1. Bloomberg [↩]