Shares of Avis Budget Group Inc. more than doubled on Tuesday as retail investors rushed to get a piece of the heavily shorted U.S. car rental company after its quarterly results beat Wall Street estimates.
Avis executives also said the company has been in talks with manufacturers regarding its plans to add more electric vehicles to its fleet going forward.
The stock closed up 108 per cent at US$357.17 after multiple trading halts for volatility. Shares jumped as high as US$545.11 earlier in the session.
The steep climb in Avis shares was evocative of the rally in shares of GameStop Corp. and other so-called meme stocks earlier in the year, driven in part by retail investors co-ordinating on Reddit’s WallStreetBets and other online forums.
About 21 per cent of Avis Budget’s free float shares are shorted, data from S3 Partners showed, increasing its vulnerability to a phenomenon known as a short squeeze, where investors betting against a company are forced to unwind their positions after a rally in the stock price.
Short sellers were hit with US$4.29-billion in mark-to-market losses at a surge to US$481.50 in Tuesday’s session, S3 Partners’ managing director of predictive analytics Ihor Dusaniwsky said.
“The short squeeze could force some existing short sellers to close out all or part of their positions in Avis.”
Avis was among the top trending stocks with a 608-per-cent jump in message volume on investor-focused website stocktwits.com, indicating interest from small-time investors.
Total revenue of Avis surged 96 per cent to US$3-billion in the third quarter from a year earlier as higher number of COVID-19 vaccinations encouraged people to get back on the road. Excluding items, the company earned US$10.74 a share.
Analysts had expected earnings of US$6.52 a share on revenue of US$2.71-billion, according to Refinitiv IBES data.
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