Avis Budget Group has publicly criticised one of its largest shareholders, hedge fund Pentwater Capital Management, over its role in the sharp rise and subsequent collapse of the company’s share price, according to a report by Bloomberg.
The dispute follows an extraordinary rally in Avis stock earlier this month, when disclosure of Pentwater’s sizeable stake triggered a surge of more than 600%. The move was widely attributed to a classic short squeeze, with bearish investors forced to buy shares rapidly to cover positions, sending the price sharply higher.
However, momentum reversed abruptly after Pentwater revealed it had offloaded 4.3 million shares on 22 April, shortly after the stock reached a record closing price near $714. The shares fell 38% on the day of the sale and have continued to decline, though they remain above pre-rally levels.
Speaking on a post-earnings call – during which Avis reported a larger-than-expected quarterly loss – CEO Brian Choi suggested the hedge fund’s actions were central to the sell-off. He pointed to the scale and timing of the disposal as a key driver of the sudden downturn.
Choi also indicated that the company is exploring potential legal avenues, stating that its advisers are reviewing whether Pentwater’s trading activity may have breached US securities rules. In particular, he referenced regulations designed to prevent so-called “short-swing” profits by major shareholders.
Under these rules, investors holding more than 10% of a company’s shares may be required to return profits generated from buying and selling stock within a six-month window. Pentwater had built a stake exceeding 20% prior to its recent sale, raising the possibility of regulatory scrutiny.
Pentwater has not publicly responded to the allegations.
