Avis Budget Group Settlement and Share Reaction
Avis Budget Group (NYSE:CAR) saw its shares surge 8% in after‑hours trading on Monday following the announcement of a $650 million cash settlement with hedge fund Pentwater Capital Management LP. The settlement resolves a dispute under Section 16(b) of the Securities Exchange Act concerning alleged illicit short‑swing profits earned by Pentwater.
Background of the Dispute
In April 2026, Pentwater, then Avis’s second‑largest shareholder, disclosed a large stake, triggering a dramatic short squeeze that propelled Avis’s stock price up more than 600% over a few weeks. On April 22, after Avis closed at a record‑high of approximately $714 per share, Pentwater abruptly sold 4.3 million shares at prices ranging between $250 and $700. This massive sell‑off caused Avis’s share price to tumble 38% on the same day and to suffer a further 48% decline in the following trading session.
Management Commentary
Avis CEO Brian Choi publicly blamed Pentwater for the volatility, stating, “Given the quantum of shares sold in such a short span of time, our stock price experienced a significant decline. It seems the only insider active during this period of excess volatility was Pentwater Capital.”
Settlement Details and Pending Approval
Pentwater has agreed to pay $650 million in cash to settle the claims. The settlement remains subject to final court approval; a judge must formally determine that Avis diligently pursued its Section 16(b) claims and that the nine‑figure payout is fair, reasonable, and adequate.