Carvana Stock Tanks Fear of Bankruptcy

[alancw3]

From Yahoo Finance.

https://finance.yahoo.com/news/carva...154119414.html

[p nut]

Not surprising. That’s a lot of inventory they’re underwater on.

A year ago, they were around $233. July 21, they were $337. Today, $4.

[batman1425]

Does this mean I'll finally be able to buy a used car for less than MSRP on a new one?

[unterhausen]

I have seen some outlandish prices they paid for used Prius primes. Like almost the original retail on a car with 75k miles.

[buddybikes]

Perhaps good for the market if they tanked and 1000's cars hit the market. The used sector pricing is killing middle/poor class, if they happened to have had an accident or if their car died.

[ltwtsculler91]

this is unsurprising as interest rates rising is definitely squeezing them from both sides:
Cars are getting harder to sell due to consumer loan terms, leading to falling prices

Harder to raise no/low interest capital to acquire and "floorplan" inventory

Basically they're taking from both ends, buying and selling cars, and since they seem to have built out a "Uber" type of model trying to grow and become huge to then shift into profitability, this is going to be UGLY

[fmradio516]

Tpc

[echelon_john]

Sold a car back to Carvana in September for $3k more than I bought it for (from them) 15 months prior. Crazy.

Their need to grab market share was probably supportable when vc money was cheap and flowing freely but it’s a much different environment now than 6-12 months ago.

Both my purchase and sale with Carvana were excellent FWIW—I hope they survive until I move back to the U.S. because I’d love never to walk into a dealership again.

[Old School]

,,,

[rccardr]

My understanding is that financing sales and selling off loan tranches is a significant component of their financial problems. Loan tranches issued at a lower % than commonplace today are being discounted, like bonds, in order to satisfy buyers looking for a higher return.

At one point I read that their business model was really the whole loan dealio, and that the buying and selling of cars was just a way to get there.

And yeah, the prices they were offering for used cars a couple months ago
was beyond beyond.

[RWL2222]

haha. three years ago my then-16 yo was telling me he bought some carvana via his Robinhood. We drove past one of their silly vending machine buildings and talked through the business model, and how a cool looking hot company is not necessarily a good investment. Oh, and about that Robin Hood...A year goes by, he got rid of the carvana, and shut down the robin hood. He's 19 now, laughing at his former self, and has looked his berkshire and SPX numbers at Vanguard twice or three times this year. (We're talking peanut$ here--just trying to get the patterns in place.)

[verticaldoug]

Originally Posted by rccardr

My understanding is that financing sales and selling off loan tranches is a significant component of their financial problems. Loan tranches issued at a lower % than commonplace today are being discounted, like bonds, in order to satisfy buyers looking for a higher return.

At one point I read that their business model was really the whole loan dealio, and that the buying and selling of cars was just a way to get there.

And yeah, the prices they were offering for used cars a couple months ago
was beyond beyond.

Let's see, the business model is 'whole loan deals'. This is what we call in the VC world a hand wave. I wave my hands very fast, and presto new business model.

The 'lending' component of the sale should be off loaded to the financing company at close of sale. They do not have a finance arm.

They raised 3.25 billion in the bond market to shore up their capital in May. The coupon was 10.25%. The bond is now trading 42 yielding 32% YTM.

Their expense base is too high @ 4,500 / vehicle for SG&A. Add the cost of acquiring the vehicle, and the math doesn't work.

At the November quarterly earnings call, management was trying to sell the pivot from growing as fast as possible, to becoming profitable as fast as possible. The analyst community was not buying it. Their math doesn't work.

[BobbyJones]

Originally Posted by verticaldoug

.
Their expense base is too high @ 4,500 / vehicle for SG&A. Add the cost of acquiring the vehicle, and the math doesn't work.

“We’ll make it up in volume!”

[DfCas]

6 weeks ago they offered me 5,000 more than the next closest offer on a vehicle I was considering selling.

[sjbraun]

I'm not surprised their stock price is crashing. Last Spring, they paid me just under $10k for a 12 year old Honda Fit that needed a paint job and body work. It was a really easy transaction for me as a seller.