Avis’ announcement of Q1 earnings next week may portend an imminent share offering
A lack of rental cars was a big issue for American travelers in 2021.
A fresh supply of rental car company shares may become a big issue for fans of the Avis short squeeze.
After the close on Wednesday, following its whopping 38% plunge, the company announced that it would be releasing its Q1 results on April 29. Why is that important?
This is not financial advice, but it would seem prudent for Avis’ management to take advantage of its richly valued shares to raise money. Its forward price-to-earnings ratio has spiked to above 135x during this parabolic advance, and analysts at JPMorgan just downgraded the shares to “underweight,” citing an “unsustainable valuation.”
A share offering would alleviate one of the presumptive factors behind the ferocity of Avis’ 427% gain from March 30 through Wednesday’s close: that its two biggest holders dominate the float, and as such, it may be difficult for short sellers to extricate themselves from their bets against the stock. That angle may have already passed its best-before date, however, as trading volumes in excess of $19 billion this week somewhat undermine the argument that short sellers struggling for liquidity are locked into losing positions.
Share offerings are what companies that benefit from big spikes out of nowhere tend to do (ask AMC!), unless they can’t. And if they can’t, they aim to find a way around that (ask GameStop!).
About two years ago, during the return of Roaring Kitty meme mania 2.0, the video games and collectibles retailer was seemingly constrained from offering shares because it was in a “blackout period” ahead of earnings (which had been scheduled for June 7). As such, management released preliminary results on May 17 along with plans to sell up to 45 million shares on the open market.
It’s impossible to tell if Avis pulled forward the date of its earnings in order to capitalize on its elevated stock price. But we’d be remiss not to note that Avis has not released its Q1 results in the month of April since 2006. Typically, they’ve dropped in the first week of May (last year, on May 7).
I’ll take this opportunity to recycle one of my favorite tweets on the subject.
For any corporate entities offended, we would of course concede that one person’s “shitco” is another person’s deep value, diamond-in-the-rough turnaround story — and that’s what makes a market.
