Carvana’s Stock Plummets Amid Bankruptcy Fears
Creditors join together to negotiate with used-car retailer.
Carvana's shares fell by more than 40% in early Wednesday trading.
IMAGE: Getty Images/keport
Carvana stock nosedived in early Wednesday morning trading as the possibility of bankruptcy loomed over the online used-car retailer.
Its shares fell by more than 40% after Carvana’s biggest creditors signed an agreement requiring them to work together to negotiate with the company. The creditors hold about 70% of Carvana’s outstanding unsecured debt.
Agreements like the one among the some 10 Carvana creditors are intended to simplify negotiations on debt restructuring and new financing and to prevent creditor infighting during the process.
One person with knowledge of the deal told CNBC confidentially that they downplayed the agreement indicating the possibility of bankruptcy due to Carvana’s liquidity, though at least one analyst said bankruptcy is more likely and downgraded Carvana’s stock to underperform. Another analyst said imminent bankruptcy potential appears slight.
Tempe, Ariz.-based Carvana’s third-quarter sales missed Wall Street expectations, falling 8% year-over-year. Gross profit dropped 31%. It blamed high used-car prices and rising interest rates for dampening consumer demand. Last year, used-car prices got a lift from inflated new-car prices due to decreased inventories.
Originally posted on Auto Dealer Today
More Industry
Autos More Appealing
Consumers gave new cars better scores again this year for design, performance and more as mass-market brands kept gaining on premium lineups, JD Power found in an annual poll.
Read More →
Used EVs Defy Overall Market
While the used-car market saw three months of price declines or stagnation, the used EV segment did the opposite – rising for three straight months.
Read More →
Gone to the Dogs
A Stellantis brand decided to have some fun with one of its SUVs’ design to address growing emphasis on family pets.
Read More →
OEM Poll Sees Industry Evolution
Kerrigan Advisors’ survey of automakers finds that tariffs, technology, network tightening and other factors are poised to reshape auto retail.
Read More →
Luxe N.C. Dealerships Change Hands
A collection of Italian and English brand franchises were handed off to the owner’s friend in the business and include the Carolinas’ only Ferrari retail stores.
Read More →
Exposure Drives Interest in Chinese Cars
At a recent demonstration, consumers had the chance to ride in a Chinese-branded vehicle, a firsthand experience that improved their perceptions and purchase intent.
Read More →
Automotive Consumers Sink Further in Debt
Most financing metrics hit records in the second quarter as more buyers locked themselves into long terms and high monthly payments.
Read More →
Agent Advocate
Rob Mancuso, who comes from a long line of auto dealers, values general agents’ place in the industry and makes a case for them taking an even bigger seat at the table.
Read More →
Driving Under Distraction
Though consumers gave higher marks to new vehicles in JD Power’s most recent initial-quality poll, high-tech interference worsened, pointing to craving for simplicity.
Read More →
Affordable New Cars a Thing of the Past
More than one out of five new vehicles sell for more than $60,000, according to Edmunds. That's up 7% compared to prepandemic 2019.
Read More →