Nov 2 (Reuters) - Shares of Avis Budget Group Inc (CAR.O) surged on Tuesday as retail investors rushed to get a piece of the heavily-shorted U.S. car rental company, giving a possible $5 billion boost to activist hedge fund SRS Investment Management, which has been the company"s biggest investor for around a decade. Avis gained after quarterly results beat Wall Street estimates. Avis executives also said the company has been in talks with manufacturers about its plans to add more electric vehicles to its fleet. The stock closed up 108% at $357.17 following multiple trading halts for volatility, its biggest daily percentage jump according to Refinitiv data going back to the 1980s. Shares jumped as high as $545.11 earlier in the session. That sent the Dow Jones Transportation Average (.DJT) surging to an all-time high. The steep climb in Avis shares was evocative of the rally in shares of GameStop (GME.N) and other so-called meme stocks earlier in the year, driven in part by retail investors coordinating on Reddit"s WallStreetBets and other online forums. About 21% of Avis Budget"s free float shares are shorted, data from S3 Partners showed, increasing its vulnerability to a phenomenon known as a short squeeze, where investors betting against a company are forced to unwind their positions after a rally in the stock price. Short sellers were hit with $4.29 billion in mark-to-market losses at a surge to $481.50 in Tuesday"s session, S3 Partners" managing director of predictive analytics Ihor Dusaniwsky said. "The short squeeze could force some existing short sellers to close out all or part of their positions in Avis." However, one winner looked to be New York-based hedge fund SRS which held a 27.7% stake in Avis, according to a regulatory filing dated Sept. 10. That stake included 18.4 million shares of common stock in Avis, and exposure to 11.4 million more shares through cash-settled equity swaps that equate to around a 16.3% of the outstanding shares of the common stock, the filing showed. The gain by the hedge fund, founded in 2006 by Karthik Ramakrishna Sarma, a former managing director at Tiger Global Management, was earlier reported by the Financial Times. Based on Avis"s closing share price on Tuesday, SRS"s position in the company, including its derivative holdings, would be worth $5.53 billion more than they were at Monday"s closing price of $171.46, according to a Reuters calculation. SRS declined to comment for this story. According to the Financial Times, the fund reached a standstill agreement in February 2020 that placed three of its nominees on Avis’s board of directors. Because of its board representation, the agreement prevents SRS from selling its shares during blackout periods, which are usually end shortly after an earnings release, the FT reported. Avis was among the top trending stocks on Tuesday with a 608% jump in message volume on investor-focused website stocktwits.com, indicating interest from small-time investors. Shares of rival Hertz (HTZZ.PK) jumped about 7%, reversing earlier losses. Total revenue of Avis surged 96% to $3 billion in the third quarter from a year earlier as higher number of COVID-19 vaccinations encouraged people to get back on the road. Excluding items, the company earned $10.74 per share. Analysts had expected earnings of $6.52 per share on revenue of $2.71 billion, according to Refinitiv IBES data. Nearly 24 million shares changed hands, easily making it the company"s busiest trading session this year. Avis shares boosted the Dow Jones Transportation Average (.DJT) by 6.2%. Reporting by Medha Singh in Bengaluru and John McCrank in New York; additional reporting by Ira Iosebashvili and Megan Davies; Editing by Krishna Chandra Eluri, Marguerita Choy and Grant McCool