Michael Burry Calls CAR Rally 'Dumb Luck' — Avis Stock Tracks Best Month Ever As Short Squeeze Deepens Wall Street Chaos

• Burry said such distortions are not new, pointing to past episodes where speculation overshadowed fundamentals. 
• SRS Investment Management and Pentwater Capital hold combined equity and derivatives positions that, economically, exceed the stock’s available public float. 
• High short interest has increased volatility, forcing bearish investors to cover as prices rise. 

Avis Budget Group (CAR) extended its extraordinary rally on Tuesday, with the stock on course to mark its best monthly performance on record, as a powerful short squeeze continued to punish traders betting against the car rental operator. CAR’s stock is up nearly 390% in April.

The stock has turned into one of the most volatile trading stories on Wall Street, surging over 600% in the past month alone. However, “The Big Short” investor Michael Burry, known for predicting the 2008 financial crisis, dismissed the move as a product of chance rather than financial logic. 

Burry Not Driven By CAR Logic 

Responding to the dramatic rally in Avis shares in his Substack chatroom, Burry called the situation “dumb luck,” drawing a parallel between today’s speculative trading environment and earlier episodes of market excess. 

“That is something we call dumb luck. Through the lens of history from Joe Kennedy’s shoe shiner to this case, speculative markets had never been short of that,” he wrote, referring to a famous investing anecdote alleging that in 1929, Joseph P. Kennedy Sr. allegedly knew it was time to get out of the market when his shoe shiner started giving him stock tips.

Avis Budget Group stock traded up over 5% overnight heading into Wednesday, and if gains are sustained throughout the session, it would mark the fifth straight day in the green. 

CAR’s Float And Ownership Squeeze

SRS Investment Management and Pentwater Capital have accumulated large equity positions and derivatives exposure that, on an economic basis, exceed the available public float. 

A fresh regulatory filing on Tuesday has added new detail to the ownership dynamics fueling the stock’s extreme volatility. Pentwater Capital Management LP and portfolio manager Matthew Halbower reported updated beneficial ownership activity in Avis Budget. According to a Barron’s report, SRS Investment and Pentwater collectively control more than the company’s entire outstanding share base when accounting for both direct holdings and derivatives exposure. 

Avis has roughly 35 million shares outstanding, yet the combined positions of the two firms exceed that total when swap contracts are included. When derivatives positions are included, SRS and Pentwater’s combined exposure is estimated at roughly 108% of Avis’s total share count, said the report. 

According to a Reuters report citing data from analytics firm Ortex, roughly 86.2% of Avis Budget’s free-floating shares were sold short as of Monday. Such elevated short interest has made the stock highly sensitive to rapid price swings, as bearish investors are forced to cover positions when prices rise instead of fall.

A short squeeze occurs when a heavily shorted stock suddenly rises, forcing short sellers to buy back shares to cut losses, adding buying pressure and driving the price even higher.  

On Monday, Barclays downgraded Avis Budget to’ Underweight’ from ‘Equal Weight’, while raising its price target to $150 from $95. The firm said the stock’s recent surge stems from a sharp supply-demand imbalance. 

What Are CAR Retail Traders Saying?

On Stocktwits, retail sentiment around the stock remained in ‘extremely bullish’ territory with retail message surging 168% in 24 hours. 

A Stocktwits user said, ​”When you see a stock quadruple in a month and then trade nearly 10 times its average volume in a single day with a $200 price swing, you are witnessing peak volatility.” 

Another user said the stock’s “current valuation is unjustifiable”.

CAR stock has gained 456% year-to-date. 

Also See: ALP, ABT, HUBC Stocks Hit 52-Week Lows Today: What's Driving The Selloff?

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