What Happened:
Shares of Online used car dealer Carvana (NYSE: CVNA) jumped up 19% in the morning session after the company disclosed a plan to restructure $9B in debt and improve its financial position. The Financial Times reported that the deal would cut Carvana's annual interest expenses by roughly $100M and reduce the face value of its outstanding $5.7B unsecured bond debt by $1.3B if fully subscribed. The reduction in interest expense would mean higher net income, earnings per share, and free cash flow.
What is the market telling us:
Carvana's shares are volatile and over the last year have had 135 moves greater than 5%. But moves this big are very rare even for Carvana and that is indicating to us that this news had a significant impact on the market's perception of the business.
Carvana is up 114% since the beginning of the year, but at $9.37 per share it is still trading more than 90% below its 52-week high of $148.65 from March 2022. Investors who bought $1,000 worth of Carvana's shares 5 years ago would now be looking at an investment worth $472.5.
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