A short squeeze, a situation in which investors betting against the stock are forced to buy shares as prices rise, occurred in Avis Budget Group shares, sending the stock to record highs. This was driven by an unusual ownership structure that leaves few shares available for trading.

The stock has jumped over fivefold this month. This has drawn comparisons to GameStop in 2021 and Volkswagen in 2008. Like those cases, the rally stems from a gap between short interest and available shares. However, Avis’s situation is unique because of its ownership structure.

SRS Investment Management and Pentwater Capital Management together own about 71% of Avis’s shares. When adding cash-settled equity swaps, their economic exposure exceeds 100% of available shares. This leaves very few shares for short sellers. As of late March, short interest was nearly all of the remaining free float. That was about 9 million shares.

The squeeze mechanism is self-reinforcing. As the stock rallies, short sellers face a self-reinforcing squeeze. As the stock price rises, short sellers lose money. They have to buy shares to close positions, but there are very few shares available. Wall Street firms in the swap agreements also need to adjust hedges as the stock moves. This adds even more demand. Investors hoping to push the squeeze further have strengthened this effect. This underscores the disconnect between technical momentum and fundamental value. At current levels, Avis trades at more than 150 times projected 2026 earnings and over 30 times projected 2026 EBITDA. The company’s market cap is about $21 billion. Its combined debt load, both corporate and fleet-related, is roughly $25 billion.

SRS is led by Jagdeep Pahwa, Avis’s executive chairman. He holds two board seats through SRS. This insider role prevents the firm from selling shares during the pre-earnings quiet period. Section 16(b) of the Securities Exchange Act also bars Pentwater from profiting on shares bought in the past six months. These limits will likely remain until at least mid-September.

Avis filed a shelf registration in late February. This allows it to issue up to five million new shares at current market prices. The company has not sold any shares under this program so far. What happens next may depend on whether either major shareholder decides to sell some of their shares once legal and regulatory limits are lifted.