“Stairs up, express elevator down” as hedge funds sock it to each other.
By Wolf Richter for WOLF STREET.
Avis Budget Group, an oldline rental-car stock in an inglorious tough business that had turned into a hedge-fund-driven meme-stock and had exploded by 770% since early March, has collapsed by 72% in about 26 hours, from the ridiculous intraday high of $847 yesterday morning to the still ridiculous $229 currently, as the massive hedge-fund powered meme-stock dynamics that had created an even more massive hedge-fund short-squeeze unwinds.
To the moon via the stairs, back to the stratosphere with the express elevator, while the heatshield burned up amid mixed metaphors. But this time around, retail investors weren’t the driver; hedge funds battling each other were.
By having imploded by 72% from the high, Avis Budget has now entered into our pantheon of Imploded Stocks, in possibly record time, for which the minimum requirement is a plunge of 70% or more from the all-time high. This collapse unwinds only a portion of the spike, during which the shares had exploded by 770% since early March, from $97 a share to $847 yesterday morning (daily chart via Investing.com shows December through midday April 23).
At some point, the plunge is going to stop, and possibly turn into a bounce, as the shorts are buying the stock to cover their short positions. But there is a ways to go back to earth.
Two hedge funds, SRS Investment Management and Pentwater Capital Management, held huge long positions, totaling 70% of the outstanding shares by March 25, according to SEC filings. SRS has been a big long-term holder of Avis and held about 50% of the outstanding shares. Pentwater disclosed in March that it built a 20% stake. The hedge funds also held cash-settled equity swaps, which further increased their exposure, according to the WSJ.
This intense buying pressure amid enormous short-interest had triggered the price explosion. Somewhere along the line, meme-stock-chasing retail investors must have jumped in for the ride to the moon, which allowed those hedge funds to start unloading their shares to retail investors while the stock was still rising, without jinxing the short squeeze.
The purpose was to create an enormous short-squeeze, as the stock was heavily shorted after a rough year and a big loss in 2025. Early in 2026, short interest was declining and reached a low in February of 45% of the float, which is still astronomical, according to the WSJ. Then the short interest started resurging again and yesterday exceeded 62% of the float.
The early shorts that had to buy back the shares at much higher prices soiled their shorts, so to speak. But the later shorts are now raking it in.
Social-media-empowered retail investors that jumped into the rally to the moon over the past week or so and failed to get out are now getting shredded, but YOLO.
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Indistinguishable from gambling at this point.
Obviously the obviously obvious observation
I agree with the basic philosophy
Lots of fun if you are on the right side. But as a retail investor you best own the stock for a long time at much lower prices and then sell it gradually to Wall Streeters on the way up. This means you need to own a ton of small stocks, and every 5-10 years get one that is like this big boy. Yahoo
@numbers I like to “gamble” (less than $1K a sitting) playing poker, backgammon and dominoes. It is not fair to compare honest “gambling” with complex “stock manipulation”…
I had been sweating my short position but I knew there would be a reckoning in time. Sanity will ultimately prevail when all is said in done in this circus of a market.
Are you still short after this price action?
I’ve covered about half of my shares today and will likely take more profit by the end of the day, but will keep a small short position going into earnings. I appreciated the Fugazi Report – brought a little rationality to this fiasco. I could see this debt-laden company issuing more shares next week. What’s your take Wolf?
My take is that I’m going to watch this from a safe distance.
Any company, when the short pressure is building, should set itself up to sell shares with an at-the-market offering, so when shares spike like this, they can sell shares into the rally to raise lots of capital with little dilution. But that’s not that easy to pull off.
Time to raise equity funds is when share prices are spiking, not after they’ve plunged on debt concerns that make share sales difficult.
Wolf, they missed the boat but the share price is still up 115% over the past month, so they may still try to capitalize on the inflated price or squeeze again before now and earnings next week and then issue. They do need to pay down that debt and issuing more shares is probably still on the table. In any case, I’ve minimized the risk going forward and am thankful to get out on top.
I was too. I shorted 30 shares last week and was down really big at one point. I’m glad it reversed the last few days.
This is what “they printed too much” looks like. There is an insane amount of liquidity in the market, gambling like money is free.
Yeah, hopefully Kevin Warsh can get the majority support of the Fed members to put a stop to this madness and speculation by shrinking the Fed balance sheet.
And lowering interest rates so people can buy more using margin debt!
Avis was only down 37% this morning! Amazing what difference just a few hours makes!
MW: ServiceNow’s stock sinks toward worst day ever, taking the software sector down with it
MW: Trump’s meme coin is down 80% since his first event promoting it. He’s holding another gala for it this weekend.
Will that trigger the next 80% plunge?
That’s the beauty of 80% plunges – you can have many of them. You can “back up the truck” or “buy the effin’ dip” after an 80% plunge and experience another 80% plunge, and another….on the way to ZERO.
The U.S. inflation picture hasn’t been this bleak in nearly 4 years
The sort of people who gamble on meme stocks like this are also the type who will tell you buying and holding index funds is a losing game.
They’re just internet repeaters. They don’t even look into the historical record or their own results.
Your description is excellent, but you misspelled “chumps”!
“Stupid is as stupid does.”
That reminds me of one of many observations of Loyd Christmas …..
Mary is there a chance that you and I may end up together, like 10 pct
No Loyd more like one in a million
What you are saying Mary is that there is a chance
The impact this had on the dow Jones transport index is laughable.
Exposed how laughable the dows share price weighting system is and makes a once useful index indicator into a joke… Nice
IMO
Alogos and AI are in some magical trading scheme……running billions of dollars.
with triggers like “buy new highs”, etc.
And there are pots of money that somehow are required to be invested before a certain date. Big trading firms know this and likely front run.
But there is NO WAY to input into these models geo political events or the threat of escalation in military theatres.
So those who have traded markets for a long time scratch their heads as markets make new highs as catastrophic events occur or threaten to occur.
There are those who manage money boasting trading programs/schemes/ that are locked into winning strategies.
Lets us all remember what the A in AI means.
Just dont send Avis under please, they are my favorite car rental company! I have been happy with Avis every time!
I don’t think that’s an issue here.
I first became registered in 1982, and I have been involved in the finance industry ever since. Over this entire time, I have had quotes up and going every day that the market is open. With all that said, I have never seen anything like what has happened since the Fed lost its mind during Covid.
That’s what happens when you give free money to the already obscenely wealthy – they destroy pricing in every facet of society.
The early shorts that had to buy back the shares at much higher prices soiled their shorts, so to speak. But the later shorts are now raking it in.
The brutality of capitalism dressed up as virtuous when reality is quite the contrary
Vegas baby!
I love these spikes and implosions, so much entertainment! Money does get vaporized though, someone’s.
But I sometimes wonder if this time it really is different, ifc there’s enough money at the top that the USA never again has a major recession with widespread asset price corrections. That’s there’s too much capacity to buy as prices start to go down, that they never really drop. I’ll hedge and say I’m talking about real assets, not made up ones, and that the infinite collapse of inflated made up assets will trigger forced selling of real assets. But that the real assets will just get vacuumed up by those that aren’t overexposed and become even more unaffordable to the average person.
Total speculation. Going to be fun watching though
We got another one!!!!
From what I could tell, even wallstreetbets wasn’t taking the bait on this cause it was just so obvious.
In completely unrelated news: Intel has broken through the dotcom bubble high!
Not profitable over the timeframe, adjusted for inflation, BUT showing that: there IS hope, even if buying the bubble! (Assuming there’s any actual underlying business or hope for profitability).
Also: renting cars is not a very good hope for profitability.