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Why Is Carvana (CVNA) Stock Facing Trading Halts Today?


Carvana (CVNA stock) logo on white object in foreground as well as a high-rise building in the background

Source: Jonathan Weiss / Shutterstock.com

Carvana (NYSE:CVNA) stock has been in the news a lot lately. With bankruptcy speculation swirling, that’s no surprise. It should also be no surprise that CVNA stock has been incredibly volatile. This is not the only name facing trading halts today, but it is one of the most well-known stocks on the list.

At one point on Friday, CVNA stock was halted shortly after the open as volatility ran rampant. It has been like this all week. Shares fell 12% on Monday, another 5.5% on Tuesday and then a whopping 42.9% on Wednesday. Then, on Thursday, the stock rallied 29.5%. At today’s high, Carvana was up another 20%.

Of course, this stock’s high short interest of roughly 50% only adds fuel to the fire. But the volatility hasn’t been limited to recent trading.

Shares have declined in 14 of the past 17 months. In that stretch, the stock has seen a peak-to-trough decline of 99%. That kind of decline is indicative of a broken business, which is why bankruptcy talks have been swirling. Let’s also not forget that shares rallied 1,600% from Carvana’s 2020 low to its all-time high.

Despite the swarming headlines, CVNA stock has experienced some insider buying over the past month as well.

CVNA Stock Faces Trading Halts as Bankruptcy Worries Grow

While bankruptcy can become complicated, it’s a relatively straightforward scenario: Will or won’t Carvana file for bankruptcy protection?

According to Drew McManigle, CEO of MACCO Restructuring Group, a restructuring looks inevitable for Carvana. He says:

“With creditors binding together and a major change in consumer sentiment since the end of the pandemic, it’s almost a foregone conclusion that a restructuring will happen. The question is how soon.”

In a rare move, Carvana’s creditors have even banned together, signing a three-month cooperation agreement. According to The Wall Street Journal, that “binds them to act in unison if the company seeks to raise new capital or pit creditors against one another.”

Of course, Carvana’s operations are a mess as well. Despite a current market capitalization of around $900 million, Carvana lost $283 million last quarter. That’s the third-straight quarter the company has lost more than $200 million.

As it relates to CVNA stock right now, the trading halts have been lifted. Shares closed up by about 2% on the session but down 15% from Friday’s high.

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On the date of publication, Bret Kenwell did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.



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