Faced with cash shortages, used-car retailer Carvana may be headed for bankruptcy, according to both a published report and calls by bearish analysts to cut its stock price target to $1.
In afternoon trading, Carvana, best known for its vending machine concept, traded at about $4.60, down more than 40% from a week ago.
Used car prices have fallen from record highs in recent months as rising interest rates made them unaffordable for many potential buyers. Carvana (CVNA), a relatively new player in the used-car market, has lost most quarters since going public. In 2017, we aimed for sales growth rather than short-term profitability.
But that loss magnified in The recent recession of the sector.
It reported a net loss of $1.5 billion in the first nine months of the year, down from a net loss of $105 million in the same period in 2021.
Cash on hand was $316 million as of September 30, down 22% from the beginning of the year, but borrowing capacity has increased. The company said last month that he would cut 1,500 jobs as car sales slowed.
Bloomberg reported on Tuesday that major holders of Carvana’s debt have signed a cooperation agreement to help and exert more leverage in all negotiations with the company. And Wednesday, the company reported that it is discussing options with lawyers and investment bankers to manage its debt burden amid its solvency concerns.
Seth Basham Analysts at Wedbush Securities cut their stock target to $1 from $9 in a note on Wednesday, and the fact that debt is trading below $1.50 is a sign that debt is “likely.” said to indicate that A restructuring that can render shares worthless in a bankruptcy scenario or, at best, very dilute. ”
carvana launch Ten years ago, it planned to disrupt the used car market, offering online car shopping and trade-ins, and a signature car vending machine. But Basham said he had worse problems with CNN Carvana than with other used car dealers.
“They put the cart in front of the horse,” he said. “They built a lot more infrastructure for sales than they do now, and it had a lot of overcapacity.”
The company commented directly on the report about meetings with lawyers and bankers, but only said it was not a party to any cooperation agreements between bondholders.
“Our message to our customers, shareholders, employees and other stakeholders is clear. We have sufficient liquidity to reach ,” the company said in a statement. “These reports will never change that strategy.”
But the reports only fueled the already-ongoing stock sell-off. The stock so far this year has seen him down 97% at the close of trading last Friday. They closed at $3.83 a share, down 43% in a day, after plummeting to an all-time low of $3.55 a share on Wednesday.
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