Carvana seeking financial advice to manage billions in debt

Carvana is seeking financial advice after a difficult year of stock crashes, sputtering demand and high debt.

In 2020 the retail company witnessed a record breaking year thanks to a surge in demand during COVID. By the end of 2021 the company had seen its highest stock price of $360, and the company’s first quarterly profit.

In response to the market, company leaders purchased a surplus of used-vehicles to stock its inventory, banking on continued growth as supply chain issues resolved and the market fully recovered from the pandemic. Instead consumer demand for vehicles, new and used, decreased significantly over 2022, as did prices. Carvana became stuck in an increasingly disadvantageous position, unable to sell inventory fast enough to pay off its dues, resulting in roughly $9 billion in debt and a stock price drop of roughly 97%.

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Since it became clear its operations were in trouble, the retailer has been forced to make difficult choices while balancing investor sentiments on the longevity of the brand. Bloomberg reported the company is now in talks with law firm Kirkland & Ellis and investment bank Moelis & Co. to reorganize its debt plans.

Although there were some gains, most of the auto-industry saw declines in sales throughout 2022. However, while most automakers and dealerships have managed to avoid catastrophic losses thanks to a rising EV market and careful spending, market analysts remain uncertain about the future of Carvana, with some warning it could face bankruptcy by next year if it is unable to resolve its debt crises.

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