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**Edit: Added the pictures back in since they were lost in previous edits. Words would mean nothing without my actual performance backing them up.**
**Also, there is no TL;DR version. That’s how regards get promoted to bagholders, jumping in without fully understanding the play or having an exit plan.**
*Disclaimer: Not financial advice, I just like the company/stock and the opportunity to make more money. This post does not discuss a short squeeze, just basic supply and demand.*
Whether you joined the last rally or not, I’ll be in for the next $CAR rally.
Brief intro about me. I know this is unusual for a DD post, especially on reddit where doxing is a real concern, but I want people to understand who I am and my background, not just see another random regard posting DD.
I am a former security (R&D) dev who left the rat race in Feb to start my own hedge fund, along with a separate investment fund for friends and family. The riskier plays are done strictly in my own fund.
For context, I played the last one by shorting with spreads at the top, then picking up 4,200 shares in the low $200s, and hedging ER with puts and covered calls since it was definitely wild. You can see the profits from the short play at the very last peak, followed by about a \~20% drawdown.
https://preview.redd.it/yj69kttejmyg1.png?width=1126&format=png&auto=webp&s=de1f40042f8c1e7810aa7346be98b53bb71a78e3
https://preview.redd.it/m3cesfl4jmyg1.png?width=2353&format=png&auto=webp&s=8a84b061e2f63e3867d4589a81fc109c0b005527
The play definitely affected my performance in the short term, but you can see I’ve only been in BIG plays, ranging from shorting scam companies like $DJT, quantum (scam) companies, and Trump circle stocks, to going long on undervalued companies like $INTC, $G\*\*, $EIX, $PCG, and $HPE. I pick a side, time it well, and build my position around that.
https://preview.redd.it/c3lf5nc8jmyg1.png?width=898&format=png&auto=webp&s=7cbae2e56c018da6eba3055912c0b96a03b86f89
I think that is enough to establish that I am a regard who has something loose in his head and is addicted to adrenaline. I also opened my post history for everyone to dig around. Here comes the actual DD.
# I. Management not selling shares
Management has not been selling shares, especially at this price level, because it is currently below what they believe it should be.
From the Earnings Call transcript: [https://ir.avisbudgetgroup.com/static-files/33eb82e8-bdc5-4390-9711-24faf5d52a4a](https://ir.avisbudgetgroup.com/static-files/33eb82e8-bdc5-4390-9711-24faf5d52a4a)
>We believe that this significant increase in ownership, combined with the high short interest in our name resulted in a short squeeze. That much is well understood. Here's what we're absorbing just now. After market closed yesterday, Pentwater disclosed the sale of 4.3 million shares for gross proceeds of $1.75 billion on April 22 and April 23. Given the quantum of shares sold in such a short span of time, our stock price experienced a significant decline.
>
>It is important to note that Avis has not bought or sold a share since 2024. Our largest shareholder, SRS, has not bought or sold a share since 2023. So it seems the only insider active during this period of excess volatility was Pentwater Capital. Pentwater has acknowledged that its sale of Avis stock, at least in part, was violative of the SEC Section 16 short swing profit rules. Avis has requested Pentwater furnish it all relevant information concerning the trades and Avis will aggressively pursue all rights on behalf of our stockholders.
>I can tell you this much. We have no intention of issuing shares anywhere near these levels. And more broadly speaking, Listen, I bought my first shares in Avis in 2010. So I've been involved with this company for 16 years now. Back then, and you've covered us for a while, but you know that the Avis had 129 million fully diluted shares outstanding.
>
>And since then, in my capacity as a large shareholder, a Board member, a CFO, I've been very consistent in my belief that our shares are undervalued and have advocated for buying back stock. So our shares outstanding today are 35 million shares.
>
>So we've retired 94 million or 73% of those original shares outstanding. I've not seen public companies reduce their share count by anything close to that order of magnitude. So we are true believers of this business. And on a fundamental basis, we were repurchasing our shares as high as $300 post-pandemic. So the thought of doing the opposite and issuing shares never entered my mind until this situation arose.
>
>Now you're right, we put an ATM in place because it'd be irresponsible not to. We've done this in the past as well, and we haven't issued any shares. So I'm not here to trade Avis for value extraction. We're going to put in the hard work and create value by building a better business. It might not be as flashy as making a quick buck, but that's the journey we're on, and we take pride in that.
# II. Pentwater situation
Even though management stated they would go after Pentwater for $1.75B in profits (see the transcript), since Pentwater was an insider and subject to the Section 16(b) short swing profit rule, I did some further digging and suspected that they only sold the \~10% they held BEFORE becoming a 10% holder.
Meaning, if those shares were held long enough, they could sell them without forfeiting the profits to Avis Budget Group, and that is exactly what they did.
What happened:
* Pentwater already sold all the shares they held prior to becoming a 10% insider (and held for longer than 6 months), meaning they planned this for a while. They are currently around 11-12%.
* They cannot sell the newly bought shares (in March - April) and keep the profits until around Sep - Oct. Otherwise, all gains would fall under Section 16(b), meaning the profits would be returned to Avis.
* Again, they already sold ALL shares that were held longer than 6 months, and even sold \~100k extra (dipping into the newly bought shares). The profits from those \~100k shares will go to Avis. Both sides’ lawyers are likely already discussing this.
My estimate is about $30M of free money going to Avis from those extra 100k shares, assuming the profit was $300 - $400 per share on average.
Sources:
See the footnotes of the two Form 4 filings, where Pentwater acknowledges that some of the sales are subject to the Section 16(b) short swing profit rule:
1. [https://www.sec.gov/Archives/edgar/data/1425851/000090266426002181/xslF345X06/ownership.xml](https://www.sec.gov/Archives/edgar/data/1425851/000090266426002181/xslF345X06/ownership.xml)
2. [https://www.sec.gov/Archives/edgar/data/1425851/000090266426002182/xslF345X06/ownership.xml](https://www.sec.gov/Archives/edgar/data/1425851/000090266426002182/xslF345X06/ownership.xml)
That means they RAN OUT of shares that can be sold without giving back all the profits to AVIS.
# III. Float + pressure mechanics
The pressure Pentwater released was about \~3M shares, roughly 10% of the float.
They made BILLIONS selling at the top. Again, they brought 3M shares IN and 3M shares OUT, tripling the profit. That means EVERYONE can theoretically do the same. I am not discussing a short squeeze here, since it is prohibited in this sub, but my regarded math is definitely mathing that the price could go up when supply is scarce, which is common sense.
3M shares =
* 3,000 people holding 1,000 shares each, or
* 30,000 people holding 100 shares each
Just an example to show how thin the float is.
Also, if this is profitable, what prevents Pentwater from doing a second round, buying again to release their 12% once they have held it long enough? That would be around the Sep - Oct time frame. In the meantime, it is MY turn to play.
Last but not least, management has earned my respect, just read the ER transcript to understand why for yourself. And the strong season for car rentals, with the World Cup happening in the U.S., Avis’s largest market, this summer.