Summary
Avis Budget Group Inc. saw extreme price swings after a large investor disclosed a stake and then sold millions of shares. Chief executive Brian Choi blamed the subsequent block sales by Pentwater Capital Management LP for last week’s abrupt drop in the company’s share price and suggested the transactions may have raised questions about compliance with Securities and Exchange Commission rules.
Details of the stake disclosure and sales
Pentwater revealed late Tuesday that it sold 4.3 million Avis shares on April 22, selling across multiple transactions at prices described as roughly between $250 and $700. The disclosure followed a period when the stock traded near a record high, with the company noting the stock had closed at nearly $714 shortly before the sales were executed.
The market reaction was immediate. On April 22 the stock fell by about 38%, and it declined by a further 48% in the subsequent trading session.
Context of the earlier rally
Pentwater had earlier contributed to a rapid rally in Avis shares when it disclosed a substantial stake in the company. That announcement coincided with a short squeeze - short-sellers buying stock to cover bearish positions - which propelled the share price higher by more than 600% over several weeks, according to the company’s account.
Company response and next steps
During a Wednesday investor conference call held after Avis reported a quarterly loss that was wider than analysts expected, Choi identified Pentwater as the probable catalyst for the reversal in price. He stated: "Given the quantum of shares sold in such a short span of time, our stock price experienced a significant decline." He added: "It seems the only insider active during this period of excess volatility was Pentwater Capital."
Choi said Avis intends to "aggressively pursue" its options regarding the matter. Pentwater, identified as the company’s second-largest shareholder, did not reply to requests for comment.
Key takeaways
- Pentwater sold 4.3 million Avis shares on April 22 at prices reported between approximately $250 and $700.
- The stock fell about 38% on the day of the sales and another 48% the next session.
- A prior disclosure of a large Pentwater stake had helped trigger a short squeeze, driving the stock up more than 600% in the weeks before the decline.
Implications for markets and transportation sector
The episode underscores how concentrated share movements by a major institutional holder can create substantial volatility for a company operating in the car rental and broader transportation sector, and how such volatility can affect investors and market participants.