Short-Swing Short Squeeze
Avis, PSUS double IPO, LP advisory committees, selling equity in a book and a weird first day at the investment bank.
Over the past few weeks, Avis Budget Group Inc. had a short squeeze. (We talked about it a couple of weeks ago.) Two hedge funds, SRS Investment Management LLC and Pentwater Capital Management LP, owned about 69% of its stock, or 108% (!) if you include derivative positions. Other investors were at one point short something like 49% of its stock. This apparently became unsustainable, some short sellers capitulated and had to buy back the stock, and the stock ripped up.1 And then it ended. The stock closed at $99.90 on March 20, got all the way to $713.97 on April 21, and closed yesterday at $182.
On paper, the winners of this short squeeze, at its peak last week, were (1) Avis, which became vastly more valuable over the course of a few weeks, and (2) Pentwater and SRS, who had billions of dollars of paper profits on their Avis positions. But what could they do about it? The obvious answer, when your stock is up 600%, is to sell some stock. But Avis, Pentwater and SRS were all legally constrained from selling during the squeeze: