Benzinga -
- On Friday, Carvana Co (NYSE: CVNA) cuts its workforce by about 1,500 people in its second round of lay-offs to match its size with the current environment.
- According to analysts, its weakening finances mean raising funds would be difficult and costly, and it could run out of cash in a year.
- Carvana’s interest expense nearly doubled early this year when it paid up to get financing for an acquisition.
- In February, it agreed to buy a car-auction business, ADESA Inc, to help boost inventory. Car sales slowed, however.
- Its cost to finance car purchases is up by three-quarters this year, and some of its real estate has lost value. Meanwhile, car buyers are holding off purchases in the hope that rates will fall.
- Wall Street Journal writes that Carvana became wildly popular among car buyers, with heavy advertising and haggle-free cars delivered to their doors.
- Carvana thrived when interest rates were low. Its credit line from Ally Financial to buy cars had an average 2.6% interest rate last year, compared with 4.5% at the end of September.
- S&P Global Ratings warned that Carvana’s liquidity likely would erode faster than expected and changed the outlook on its CCC+ rating to negative earlier this month.
- After closing the ADESA deal, it laid off 2,500 workers.
- Price Action: CVNA shares are down 4.84% at $7.67 during the premarket session on the last check Monday.