Things were already looking scary for investors of used-car retailer Carvana after a grim third-quarter earnings call in November. Then its stock fell 43% to $3.85 following reports in December that implied the company could be steering toward a restructuring, according to a em>Wall Street Journal commentary. It was reported in early December that Carvana was working with its legal counsel to evaluate restructuring options and that its creditors signed cooperation agreements to ensure they work in unison if the company attempts to raise new debt. Since that scare, though, Carvana’s stock had inexplicably gained 162% through Thursday’s close, alongside other meme-stock favorites. The company’s fourth-quarter results, released late Thursday, were even more frightening. Carvana said that its revenue fell 24% during the period compared with a year earlier. Its net loss widened to a record $1.4 billion, nearly eight times the net loss it saw a year earlier and a lot worse than the $426 million loss analysts polled by FactSet expected to see. Fourth-quarter cash burn (or negative free cash flow) of $800 million brought its 2022 total to roughly $1.8 billion — nearly its current market value. Guidance for the first quarter doesn’t look pretty, either. The company said it expects a sequential reduction in the number of cars sold in the current quarter as it tries to contain marketing costs and inventory size; Wall Street had been expecting it to increase. Carvana’s heavily shorted shares declined by a relatively mild 3.7% in after-hours trading following the earnings call.
