Carvana, billed as the Amazon of used cars, captured investors’ imaginations. By September 2018, it had shot to a record high of $70.82. Then, gravity took hold: the company’s losses kept piling up, and its shares tanked, falling to about $30 in mid-December.
Today, the stock has nearly erased the loss, fetching $66 on Friday. Since its initial offering, it’s soared more than four-fold.
Some investors doubt Carvana can keep up the pace. Short sellers have borrowed more than half the company’s publicly traded shares. That makes Carvana one of the Russell 3000 Index’s most-shorted security.
Carvana declined to comment. Ernest Garcia II didn’t respond to a request for comment.
Carvana’s losses have attracted short sellers. So has the company’s other business -- originating and selling auto loans, some of them made to car buyers with limited or bad credit histories. Critics say they want to know more about who’s buying the loans.
Loan Purchasers
One buyer has been Delaware Life. The insurance company is controlled and part-owned by Mark Walter, chief executive officer of Guggenheim Partners, an investment and advisory firm. A Delaware Life spokesperson said the firm last bought Carvana receivables in 2016. Delaware Life, through a subsidiary, also owns about 9 percent of Carvana, securities filings show.
Less is known about other purchasers. Since at least 2017, some of Carvana’s loans have been sold through an entity called Sonoran Auto Receivables Trust. About three-quarters of the funding for the trust has come from Ally Financial Inc., the Detroit-based successor to GMAC, according to Carvana. The company doesn’t disclose who financed the rest.
Earlier this month, Carvana turned to a new source of financing, selling $350 million worth of its auto loans in what it called its first asset-backed securitization.
This article was provided by Bloomberg News.