What Happened?
Shares of online used car dealer Carvana (NYSE: CVNA) jumped 5.6% in the morning session after the company announced new financing terms with Ally Financial. Under the agreement, Ally will purchase roughly $4 billion in auto finance receivables over the next year. By selling the receivables to Ally, Carvana receives cash, which is more readily available to be invested back into the business. This announcement addresses concerns raised by short seller Hindenburg Research regarding the sustainability of Carvana's relationship with Ally. Overall, the update provides a more positive outlook on Carvana's liquidity and clarifies key uncertainties, which the market does not like.
The shares closed the day at $188.83, up 6.5% from previous close.
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What The Market Is Telling Us
Carvana’s shares are extremely volatile and have had 50 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock dropped 11% on the news that short seller Hindenburg Research published a report accusing the company of "accounting manipulation and lax underwriting." In response, Carvana called the report "intentionally misleading and inaccurate."
Carvana is down 5.4% since the beginning of the year, and at $188.85 per share, it is trading 27.6% below its 52-week high of $260.80 from November 2024. Investors who bought $1,000 worth of Carvana’s shares 5 years ago would now be looking at an investment worth $2,045.
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