Avis Budget Group (CAR) appears to be facing a short squeeze.
Shares of the car rental agency were up another 6% on Tuesday following a 23% surge on Monday. Over the past month, the stock is up 500%.
The short interest in Avis as a percentage of shares outstanding currently stands at 25%, according to S&P Global Market Intelligence. That figure represents the portion of shares that are currently sold short and not yet covered: a ratio above 10% is considered high, while one above 20% is considered extreme, with a high risk of a short squeeze.
According to Deutsche Bank research analyst Chris Woronka, the squeeze was triggered at the beginning of the month by filings that showed two investors, SRS and Pentwater, controlled 71% of shares. When synthetic ownership is factored in, the two investors effectively controlled 108% of Avis shares.
“Recall that CAR’s stock itself is actually no stranger to sharp rallies,” Woronka wrote on April 6. “On November 2, 2021 its shares more than doubled, from $163 to $357 (the intra-day high was $545) on the heels of a strong earnings report and, more importantly (in our view), a disclosure that the company had repurchased 16% of its shares during the fiscal 3Q of 2021.”