Avis Budget Group Inc. will receive $650 million in cash from Pentwater Capital Management as part of a settlement agreement. This payment is intended to resolve a lawsuit initiated by Avis concerning short-swing profits made by the hedge fund. The settlement is contingent on court approval.
This dispute stems from volatile trading activity earlier in the year, specifically in late April 2026, when Avis stock experienced dramatic swings. Pentwater Capital Management, a significant shareholder, was accused by Avis CEO Brian Choi of driving a sharp short squeeze that propelled the rental-car stock from under $150 to a peak of about $848. Pentwater had built a stake exceeding 20% prior to offloading 4.3 million shares, shortly after the stock reached a record closing price near $714. This disclosure of Pentwater's substantial stake triggered a surge of over 600% in Avis stock, attributed to a classic short squeeze where bearish investors were forced to buy shares to cover positions, driving the price higher.
The surge in Avis shares led to significant mark-to-market losses for short sellers, estimated at $5.8 billion by April 21st. However, the momentum abruptly reversed after Pentwater's sale, causing shares to fall 38% on the day of the disposal and continue to decline. Avis had explored legal avenues, citing potential breaches of US securities rules, specifically regulations designed to prevent "short-swing" profits by major shareholders who hold more than 10% of a company’s shares and trade within a six-month window. Pentwater had previously indicated willingness to collaborate and return profits subject to these rules.
The settlement highlights how regulatory safeguards intersect with volatile trading and how concentrated positions can ignite sharp volatility. Despite the rollercoaster ride, Avis shares gained 6.5% in postmarket trading following the announcement of the settlement.
