Everyday investors have been thrown into panic after a once red-hot stock suddenly collapsed, with some commentators warning it could mark the 'biggest collapse in history.' This month, shares of car rental agency Avis Budget Group skyrocketed by more than 700 percent, rising from below $100 to over $847. However, the rally has now dramatically reversed. The stock plunged around 70 percent in just two days, wiping out huge gains and leaving late investors nursing heavy losses. They have now fallen back to around $210, meaning the roughly 700 percent rise has been effectively undone by a drop of about 75 percent, leaving the stock only modestly above its starting point.
A crucial aspect is that many ordinary investors tend to pile in during the most exciting part of a rally, near the top. This means a large number of buyers are now likely sitting on steep losses, having bought close to the highs and watched the price collapse in a matter of days. Despite these eye-watering moves, analysts say the surge had little to do with the strength of the underlying business. Instead, it was fueled by a powerful short squeeze—a Wall Street phenomenon where traders who bet against a stock are forced to buy it back as prices rise, sending shares even higher.
The Mechanics Behind the Volatility
In Avis's case, this dynamic was supercharged by an unusually tight supply of stock. A handful of major investors, including SRS Investment Management and Pentwater Capital Management, control more than 70 percent of the company's shares, leaving relatively few available for trading. This created the perfect conditions for extreme volatility. As the price surged, short sellers scrambled to cover their positions, driving the rally even further—until momentum suddenly snapped. Shorting involves borrowing shares and selling them in the hope of buying them back later at a lower price to make a profit.
Online commentators have reacted with alarm. One wrote: 'You're witnessing the biggest collapse in stock market history.' Another joked: 'I thought we were going to the moon—what happened?' Bret Kenwell, an investment and options analyst at eToro US, told the Daily Mail that Avis's surge and sink is reminiscent of the GameStop saga. In 2021, shares of the gaming retailer surged dramatically after a group of retail investors, many coordinating on Reddit, began buying the stock to challenge large hedge funds that had bet against it. As the price soared, those hedge funds were forced to buy shares to cover their losses in a short squeeze, driving the stock even higher in a rapid and unprecedented rally.
Comparison to GameStop and Market Implications
Kenwell elaborated: 'The situation with Avis—where shares rose about 700 percent in a month before reversing lower and falling more than 70 percent in a two-day span—is reminiscent of GameStop in the sense that a massive short squeeze fueled the rally, but differs in the underlying mechanics. In Avis's case, a small handful of investors owned a large portion of the float, which helped create the conditions for a major short squeeze. That attracts attention on Wall Street and often invites volatility, which is playing out now.' Looking ahead, Kenwell said 'it's impossible to know what comes next,' but added that investors should expect 'a bumpy ride either way.'
The dramatic rise in Avis didn't just affect its own stock; it also spilled over into rivals like Hertz Global Holdings. Hertz shares nearly doubled from late March as excitement spread across the sector. This pattern highlights how hype-driven moves can lift an entire industry—and then just as quickly reverse. For now, retail investors who bought near the peak are left grappling with significant losses, while the broader market watches for further fallout.
