“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.
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.
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.
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?
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.