Carvana cuts staff as losses mount

Carvana let about 4,000 employees go in 2022 as it struggled to deal with the debt that piled up as it acquired cars at elevated costs. The company announced it will lay off more workers and take other measures such as reduced work hours to contend with weak sales. https://yhoo.it/3kcjnZt

?? The Wall Street Journal asks RapidRatings to speak on the failures of Carvana. RapidRatings' Chairman & CEO James H. Gellert Gellert discussed the operational degradation and long-term financial risks associated with used car company Carvana, measured by our financial health rating system. “And when Carvana does make a sale, it sometimes sells the car for less. Though average sales prices have been relatively flat, prices on Carvana’s bestselling models have declined an average of 5% since the second quarter, according to JXCE. “It’s almost a classic example of a company that bought high and is selling low,” said James Gellert, CEO of risk analytics software provider RapidRatings, which analyzes companies’ financial health.” Read the RapidRatings perspective HERE: https://lnkd.in/eRWB49dX

?? The Wall Street Journal asks RapidRatings to speak on the failures of Carvana. RapidRatings' Chairman & CEO James H. Gellert Gellert discussed the operational degradation and long-term financial risks associated with used car company Carvana, measured by our financial health rating system. “And when Carvana does make a sale, it sometimes sells the car for less. Though average sales prices have been relatively flat, prices on Carvana’s bestselling models have declined an average of 5% since the second quarter, according to JXCE. “It’s almost a classic example of a company that bought high and is selling low,” said James Gellert, CEO of risk analytics software provider RapidRatings, which analyzes companies’ financial health.” Read the RapidRatings perspective HERE: https://lnkd.in/eRWB49dX

Interesting article in today’s WSJ regarding the ongoing saga of Carvana’s travails. As noted in the article, “It’s almost a classic example of a company that bought high and is selling low,” said James Gellert, CEO of risk analytics software provider Rapid Ratings, which analyzes companies’ financial health.”

Carvana let about 4,000 employees go in 2022 as it struggled to deal with the debt that piled up as it acquired cars at elevated costs. The company announced it will lay off more workers and take other measures such as reduced work hours to contend with weak sales. https://yhoo.it/3kcjnZt

Coming to a Carvana location near you. What is the second generation use for a Carvan Auto Vending Machine? #CarvanaOnLifeSupport https://lnkd.in/ef349Bfm

Auto lending. More on used car values. I was asked yesterday what's my forecast on autos. I think it's a mixed bag. I think we see more supply of new vehicles as we get further away from supply chain issues. I think this historic drop in used car values takes away some of the punch bowl in the used sector. I see the severity of losses continuing to climb, which impacts portfolio lenders. This article has a bit more of a doom and gloom to it, which I don't fully subscribe to. "Right before the global financial crisis, former Citigroup Inc. Chief Executive Officer Chuck Prince famously said that as long as the music is playing, you've got to get up and dance. During the pandemic-era car-buying frenzy, no business spent more time on the dance floor than the global auto industry, which had never before enjoyed so much pricing power" "In no segment of the auto universe are those cracks showing more clearly than in the used-car market. Retailer CarMax Inc. limped its way through the end of the year, while its supposed disrupter, Carvana Co., scrambled to avoid insolvency. Used-vehicle values in December registered the biggest tumble in the 27 years that Manheim—the largest auto-auction company in North America—has been keeping tabs. And carmakers' captive finance companies are staring down a profit plunge." "Although carmakers still don't have as many chips as they'd like, supply is bouncing back. New-vehicle inventory was up 81% toward the end of 2022, with almost 740,000 more vehicles available than in 2021, according to Cox Automotive" "There's a rebalancing taking place right now: an improved chip offering and slower car demand, due to the higher interest rates and tougher access to credit" "Wall Street is taking notice, because the combination of declining used-car prices and rising delinquencies will affect securities that back vehicle loan debt for riskier borrowers" #autos #values #consumer https://lnkd.in/g25nmZwy

Many Covid stocks came crashing down in 2022, but one significantly more than most. ?? Carvana might be not as a familiar to European investors. The business model is somewhat close to European unicorn AUTO1 Group and had profited signficantly during and after Covid given the increase in used car prices. However, other than its digital peers, Carvana had invested not only significantly into physical locations with "car vending machines" (look it up, no joke), but had also overextended itself with a $2bn acquisition of a competing car auction company. Apollo Global Management, Inc., known among others for its successful investment in Hertz (one of my favorite Covid stories), joined the fray in April 2022 by buying up more than $800mn in Carvana debt offering a hefty 10,25% coupon at the time. Today, however, the bonds trade at less than 50 cents on the dollar, and the company is preparing measures trying to incite what has been nicely described as "creditor-on-creditor violence": Incentivizing creditors to go up against each other in order to optimize the capital structure at the loss of minority debtholders, as we have creatively seen in the recent time in deals such as KKR's Envision or Apollo with Caesar's Palace a few years ago (although at less success). No idea how things will go for equity investors (including its billionaire founder and controlling shareholder), but definitely a risky affair. Link in comments! #carvana #privatemarkets #alternativeinvestments #publicmarkets #distressedinvesting