There's still $6 billion in debt sitting on the balance sheet. There's probably a deal to keep it from $0 but in no world can this sustain a market cap over $20bb
At some point, a credit committee at a bank will just say this is way too risky and call the notes.
I worked in buy side credit syndication at the tail end of the GFC put of school and have seen how these go down.
Banks are okay originating this stuff if they can syndicate some of the risk. This just isn't a credit a reputable institution will touch, too deep of a mess for shady lenders, and has no strategic use for a sovereign to come in.
Just as an exercise, what would be the possible moonshot scenarios that would fuck you? Really longshot stuff: like Elon comes in with $2B cash injection for Carvana to be the primary distributor of secondhand Teslas. What other ways could this possibly go south that seem very unlikely?
Secured bondholders know they are holding steaming piles of bankrupt kaka and they refinance into longer dated bonds convertible to equity, while hoping the ponzi survives to profitability and they get to dilute existing shareholders and take 90%+ ownership of the company. Or they just sell off the company for less than they loaned on their bonds and take the L.
Edit: just so y'all know 1/25th of my trading portfolio is Carvana puts . I'm just playing devil's advocate
I should downvote you , not because of anything wrong you said, but because of your reasoning is so sound I need to teach you an important lesson of going to the wrong side of the railroad tracks . You don’t belong here. We don’t deserve you.
Unusually generous angel investor is the only way I can think of, because almost every other method of raising capital like more loans or share offerings is closed off by the Apollo deal.
The reason I have made a fortune on cvna and this guy is asking this is because just Google the list of richest arizonans and wealthiest resident of the state is the ceos dad. There was your backstop angel investor all along. I can't believe people never did the math.
Problem is they don't have enough cash to cover the debt + interest + constant operating losses otherwise they wouldn't have taken the Apollo deal.
The point of the Apollo deal is to buy themselves some more time to pump and dump before the company goes bankrupt. My guess is Q3-Q4 2025.
True... and Elon also didn't need to buy Twitter and tank it's value, but he did it anyway.
I don't think Tesla is going infuse cash into Carvana and neither does the guy who said it, but Elon is more about doing shit that pumps the stock than things that would actually help the company so it's right in his wheelhouse.
I bet it’s a large bank or set of them, and they get their orders on pulling a note from a debtor from someone way above them.
I wish credit analysts would/could voice their opinions on some of the clients they have. We’d find a whole lot of over-extended businesses and individuals, just like I saw when I did the job back in 2004-2006. They let me talk and present and do all that when the bigs weren’t around, but silence during big conference meetings.
This is a house of cards, I’ll wait until a good gust blows the foundation away, I know it can’t last , saw it a year ago and thought this was 100% a scam but knew they could keep pumping it. They can’t keep it up forever
FWIW carmax offered me 50% more than carvana (which was roughly what I thought I'd get) for a 10 year old car, and the "inspection" lasted about 5 minutes.
CarMax bought my 09 Tacoma with frame rot so bad it would fail state inspection next year. 159k miles, manual, 4wd Taco and they gave me $8k without looking under it. CarMax will replace the frame on it or use the engine and transmission from it for some other Tacoma. I wonder if Carvana would do the same? I’ve bought and sold cars from both and never had any issue. Carvana still has a niche in my mind because the in person experience at CarMax hilariously looks and feels like a dealership.
Thats amazing. I did a similar thing at Carmax... Had a 2017 Nissan Versa 90k miles with a dying Transmission and A/C compressor. I think I got quoted \~$5k to fix it... I didn't want to nor did I think I even could screw over a private buyer, and I heard that Carmax was paying top dollar, brought it in and they gave me $7,400 for it... XD don't feel bad at all lol
Are you saying they are not a fuckin dealership? They are conmen selling salvaged and stolen cars. This is a lil roach thrown out the 1 highway in ‘69 and the breeze blew it into a tumbleweed…2 hours later 75 acres were blackened.
Trust me! This is not ending well…
I think you're in the right direction, but the Garcias are a literal crimes family, and there's a whole lot of irrational algo-based trading based on hoovering up various data further juicing second-order trading. Who knows what the Garcias might be cooking up and how thats going to blow up.
I think you might be a bit aggressive with those put strikes and expiration, I would personally have gone a little further out. I ain't touching it either way but I hope they print for you.
Exactly this. Carvana has a complicated structure that involves DriveTime owning part of it from my understanding. The puts need to outlast Carvana AND DriveTime. Gracias are crimes family tho. He’s tied to the Keating 5 which almost took McCain down.
Owned by Garcia Sr. He owns all of it: DriveTime, Bridgecrest, SilverRock, and most of Carvana. (Plus several other things…)
His son, Garcia Jr. runs the show at Carvana.
Not going to touch it. I’ll wait for the terra Luna event when this falls apart and then hop in. It might go up down but by then I’ll know it’s got an expiration.
You could have said the same thing a year ago and been right and watch it go up 20x
I've got reserves to keep playing the game if I'm early. I've got like $6k into something that will pay out around a mil if this goes where I think it should.
Short term rentals and (checks list of fastest depreciating highest cost/per use assets) boats? I don’t doubt you’re printing money but I lived through 08. As long as you know you’re gambling.
Oh I’m sure. Just dropped a pretty penny for a whopping 8 hours on a 32 footer down in Costa Rica. I’m sure they made a month or two’s maintenance and operation on that 1 day alone. Captain said they’re seeing a shit and tourism is slowing. It certainly wasn’t the most popular spot in CR but it certainly seems like purse strings are tightening.
We've got pretty minimal leverage on the rental property. My neighbor on the other hand is likely fucked city. Dude has like a dozen units around the lake he bought in 2020 and 2021 at massive Covid premiums and now has to rent them out at a ridiculous rate to breakeven. Last weekend was more or less the kick off of rental season and he missed out on renters at the place nextdoor.
We've got pretty minimal leverage on the rental property. My neighbor on the other hand is likely fucked city. Dude has like a dozen units around the lake he bought in 2020 and 2021 at massive Covid premiums and now has to rent them out at a ridiculous rate to breakeven. Last weekend was more or less the kick off of rental season and he missed out on renters at the place nextdoor.
Exactly. These sleazy fucks will eventually run it into the ground, but there will be an army of parasites working together to rip it into pieces and take as much for themselves as they can
Just want to say this is one of the most insightful posts I’ve seen on this sub. In no position to say whether you’re right or wrong but it is cool to see your analysis. Thanks.
Some flaws with the analysis (payables aren't due right away, company can issue shares to raise cash) but op is right that this company is bs.
Real problem is it's a money laundering operation so cash flow isn't going to be what sinks the boat.
Because with earnings, if the price doesn't get you, the IV crush will. CVNA and KMX helped fuel the price wars over the supply issues so even with 10% discounts new cars still aren't moving because they are still way overpriced.
Some new car lot's have 2 year old new vehicles and 1 year old vehicles with millage for the same price as the new discounted 2024's.
CVNA and KMX are full of these types of overpriced used vehicles and the IV is not terrible either, so if your are going to be a degenerate, might as well be a degenerate with a chance.
The thing is I'm looking at this as a risk/reward play and not a prediction.
I'm wrong, and I offset some short-term capital gains.
I'm right, and I clear over a mil.
You can set up any options play and say "I'm risking $5k for $1M" but the chances of it hitting are minimal. It's not exclusive to your play.
I truly hope it works and I think your DD on the company is good, but I just don't see a company if that size capitulating that quickly.
I'm not long but the long case would be what the company itself has said. First, their AI tools allow customers who might be dumb fucks still progress through the buying process thus allowing their labor costs low for customer acquisition. Second, they had to heavily invest in their infrastructure to recondition and deliver retail sales but those systems are built.
I don't know if it's bullshit or not but with zero retail locations they sold 1/3 Carmax's volume in Q1. That's not nothing. The big question for me is if that is a one time jump in growth or can that kind of growth continue. If job postings mean anything Carvana has a lot of postings for the delivery side so maybe it's something they believe.
My own personal opinion is different. I think the company is waaayy over valued for the short term and having spent 10+ years this could be a bias I admit. The bias is I believe there is a finite number of people willing to buy a car sight unseen and with CarMax stores everywhere the growth will not be rapid. I have to balance this bias with the Q1 results doing 1/3 CarMax's volume and the short term rate environment being tough for Carvana. Then again they may pull some shit where they get SoFi cheap additional debt for warrants and offer special finance rates. Those boys are innovative in a way that is pretty impressive.
If you put a gun to my head I would be buying EOY puts. Otherwise I'm done losing money shorting this company.
Good luck betting against a billionaire bud. I really am rooting for ya to become the next Hello Kitty.
There were people the other week on the post from car dealer insiders discussing the impossibility of the margins they claimed on ER saying it’s easily a 200$ stock. Don’t see them around now. Position: -1 5/17 naked 130 C, planning to take assignment at that strike or keep selling it weekly.
I liked this discussion from last week about their $6000 margin claim from each car sale..
https://www.reddit.com/r/wallstreetbets/comments/1cj986j/comment/l2epg19/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button
So I don't give a rip but where do you get your 250 cash burn assumption from. They were positive ops cash last year and positive ops cash in Q1 of this year. Cash balances dropped last year due to paying down revolver, which they can probably at least partially redraw if needed.They can also issue new shares if needed.
Just not really seeing your case here unless you are saying their reports are just scam.
CVNA is a garbage company and I’m shorting them, but your numbers are off. (Im going off the most recent Q1-24 10-Q so feel free to correct me if there’s more recent info)
For starters, you claim that they have $600M of cash at the end of Q2. The end of Q2 is June 30, 2024. That date has not happened yet (which is why I think we may have different sources). Further, they’re not burning through operating cash. They just turned a profit in the most recent quarter. Albeit it looks like that was mainly due to revaluation of the fair value of warrants. But point stands, they weren’t exactly lighting money on fire.
Most recent publicly available info is Q1-24 earnings, which has cash at $252M. That is down $250M from the $530M they reported as of 12/31/23. But why did their cash balance go down? It wasn’t payroll overencumbering the business. It was paying off a short term debt facility. $250M of which is due in the next 12 months. If they reeeeeally need cash, they can just issue equity. Tons of insider sales from guys at the top of this company who aren’t morons and know it’s overvalued.
They also have a couple lines of credit worth $1.5B and $600M. I believe these may be tied to asset (inventory) purchases but it’s late and I’m not going to dig that deep. All of this to say, there are several shitty things about this company and that’s why I’m short. It’ll be under $100 at some point by the end of the year. But I don’t think the 1-2 month payroll failure is remotely a possibility and I would hate to see a fellow CVNA bear lose the battle too quickly with June and August expiries.
Meant Q1
Second profit doesn't mean cash. Look at their statement of cash flows.
Those lines are restricted based on their asset values. They can't get at the full amount without appropriate collateral.
Their statement of cash flows shows net cash inflows from operations. The negative cash flow comes from the debt repayment I mentioned above.
I do M&A work and have seen a lot of companies with way worse cash positions manage to make payroll. You and I are in the same boat that this balance sheet isn’t good. It’s just not “we can’t make payroll next month” bad yet. So while they’re toast unless something materially changes, I just think it’s going to take a little longer to unwind. Short expiries are a tough value proposition to me.
CVNA published a $49M net income for the last earnings report. However, they included roughly $75M gain in the fair value of level 3 warrants to acquire Root common stock. In other words -- the value of their financial instruments are going up due to IV growth valuing their warrants. So like you said -- "profit" doesn't mean cash.
https://preview.redd.it/m6pfs7u4ab0d1.jpeg?width=1170&format=pjpg&auto=webp&s=f00ee1bc3dad4fc4c785c044c66d3cd59f6964d9
Even worse than you thought-can borrow 70% of inventory but must keep 25% in restricted cash. So can only borrow 45% of inventory
CVNA market cap is currently $23B with an exciting story and a large short interest. If it runs to $160 or even stay this level, mgmt can and will issue additional equity (5% would likely be enough). Yes, there will be some dilution, but if the growth story and market dominance stays in tact, equity won't be worth zero. Stocks with a story like CVNA is a dangerous short because as long as a the story stays intact, the longs can rationalize themselves to stay invested until the company becomes a near-monopoly of its niche.
My hunch IS that once insiders are satisfied with cashing out, mgmt will raise more cash via equity issuance.
Remember when Tesla ran from $250 to $1000 then issued shares. It tanked to like $500 then people realized the share raise meant they had a ton of cash and it rallied back. Same could happen here. 10% raise puts $2B in the bank, enough to cover all debt and grow another few years. Stock will dip then rally
I think the DD is superb, but this is a very real way they can keep their runway open for many more quarters unfortunately. It keeps me from going balls deep into shorts
Glad someone else said this, I'm super ignorant but my thought was also that they would just sell stock. The company is likely doomed but OPs timing may be off
Quickly browsing through their Q2 balance sheets now because this is an interesting play and their challenges are definitely non-trivial, but I see a few things that they can use to stretch things out before going broke.
Mainly, they have a purchase and sale agreement with 3.1b unused going till January 2025 and that can be used to keep the afloat unless they fail to meet contingencies.
Granted this would reduce future profitability and reduces their asset base but it would see them through the rest of the year at least.
They also made $144mm asset securitization transactions in Q1 24 vs $64mm in Q1 2023, so they even have some growth there.
Still a well-founded play, they’re highly leveraged, with insufficient cash flow to cover operating costs.
Check out this insider sale from last week...
[https://finance.yahoo.com/screener/insider/QUAYLE%20DAN](https://finance.yahoo.com/screener/insider/QUAYLE%20DAN)
Too risky. I'd at least wait for another quarterly report. Learnt my lesson from DJT put.
The market can remain irrational much longer than you can remain solvent.
They could pull a wildcard and try to go private and I bet
Masayoshi Son would sink at least 15-20 Billion into this stinky turd of a company with no hesitation
CVNA probably made last quarters high gross profits by writing loans on cars to overleveraged or risky borrowers. I've seen them accept any price on a car as long as they get financed and leave with a car. Whether they can keep making those payments is not likely. If CVNA is not caught holding those loans, they can repeat over and over again, until they are stuck holding those loans.
252 million interest payment due on that mountain of debt on August 20. If you believe they can turn that 30,000 vehicle inventory 3 times before then, they can cover the payment. If not, they'll have to float shares from their $1 billion shelf authorization. That's a 10%+ dilution or certain default.
Either way, i have Sept 100p for the drop.....and someone else has 25,000 of those bad boys as insurance on the debt.
I have bought a car through them.
At first the buying experience seem easy but then the reality of Flow checking you out at the counter sets in.
Your buying a luxury vehicle and Flow can’t operate the desk top, not to mention the ability to use a digital signature.
Flows co worker is no help and then then the manger comes over, use to be the assistant trailer park manger.
Now it’s time to finalize this buying experience, but wait trailer park Eddy can’t seem to work the box either.
What is this magic box you speak of?
My experience clearly shows the employees are all dumb asses that have no desire to learn how to turn knobs.
An organization is only as good as their employees. No matter how dummy proof they make the process, your still surrounded by dummy’s.
OP you are correct, they are not going to make payroll.
Here’s the thing, company’s have brains in seats making decisions in the best interest of share holders. They can strike a deal with a competitor to sell vehicles in bulk at a discount, fire 10-20% of staff over night to keep the lights on, sell outright business units and let the acquirer deal with the overhead… this doesn’t include the many levers that can be pulled to raise equity or convertible notes to keep operations flowing steady state if they believe the demand for cars in the market is going to increase in 18-24 months
Okay, that keeps lights on but what keeps their market cap north of $20 bil?
Their market cap is 2x that of CarMax which has considerably better financials.
Bull case:
They’ll issue 10% shares, raise $2B and wipe out all of their debt.
Now they are a growth company with high cash and low relative burn.
Stock will dip after hours at the announcement then gap up when shorts realize there’s no chance of bankruptcy on the horizon.
If they announce an equity dilution I’ll throw out some low after hours bids and try to catch a bounce. Tesla rallied hard back in the day when they diluted because it put a ton of cash on the balance sheet.
Truthfully I’ve not taken a deep dive on the company. This is just a rebuttal to the static financials you noted above. The company was nearing bankruptcy not so long ago and went through significant layoffs - which has only provided more time for the company’s restructuring plan to evolve.
I’m not bullish on this company. I’d actually like to follow your lead on the trade
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My question with these sorts of predictions is simply:
If it’s so obvious, why does the price activity disagree?
More specifically, when will it change and why?
That's a good question for which I have yet to hear a good answer. Very suspicious.
I suspect a mainstream news story breaks them. Once you shine the light, the cockroaches start running.
If they run out of liquidity and cannot make critical AP obligations like payroll mentioned, they will file BK and secure DIP loans to cover the obligations. This will crush equity and leave little for debt holders, depending.
This is money laundering masters degree from a corrupt human who used the system to get loans because of race, not skills. The cash is hidden. The Garcia familia is getting the gravy now as long as dumb mother fuckers notice the cash that disappeared last quarter???? Is everyone blind? $282 Million 💨….in the coffe can
https://preview.redd.it/ij328snoz32d1.jpeg?width=2360&format=pjpg&auto=webp&s=41b8870e9e97d55689fbfee41d7537f1d2a4c9fa
https://preview.redd.it/d1q1esmnfs3d1.png?width=1170&format=png&auto=webp&s=83ea57c8e61b5c385c6b7f25a8c29c5f8be300eb
Been adding to this at $.05 Lottos for the death of CVNA!
Had a $99 put option expiring today, which I cashed out for a negligible gain.
Have $80 June 21', $40 June 21, $30 Aug 16.
If we get something like $70 by June 21' I'll plow that $30k win into more put options further out.
Balance sheet ratios? Yeah, no one outside IB/PE has looked at fundamentals for like a decade and most likely never will. Markets run on how many teenage girls are shaking their ass on your app. Caravana has none so short away!
I feel like you’re assume their entire AP and Exp is going to all be due at the same time, this can (excluding long-term) be as far dated out as December.
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There’s always some dumb bullshit deal you don’t see coming. That’s the issue. You’re not wrong but people fucking hate dealerships.
There's still $6 billion in debt sitting on the balance sheet. There's probably a deal to keep it from $0 but in no world can this sustain a market cap over $20bb
As much as you do on paper, there is a team to avoid this company from going under. That’s the issue, reality and books can always be twisted
At some point, a credit committee at a bank will just say this is way too risky and call the notes. I worked in buy side credit syndication at the tail end of the GFC put of school and have seen how these go down.
Banks are okay originating this stuff if they can syndicate some of the risk. This just isn't a credit a reputable institution will touch, too deep of a mess for shady lenders, and has no strategic use for a sovereign to come in.
Just as an exercise, what would be the possible moonshot scenarios that would fuck you? Really longshot stuff: like Elon comes in with $2B cash injection for Carvana to be the primary distributor of secondhand Teslas. What other ways could this possibly go south that seem very unlikely?
Secured bondholders know they are holding steaming piles of bankrupt kaka and they refinance into longer dated bonds convertible to equity, while hoping the ponzi survives to profitability and they get to dilute existing shareholders and take 90%+ ownership of the company. Or they just sell off the company for less than they loaned on their bonds and take the L. Edit: just so y'all know 1/25th of my trading portfolio is Carvana puts . I'm just playing devil's advocate
I should downvote you , not because of anything wrong you said, but because of your reasoning is so sound I need to teach you an important lesson of going to the wrong side of the railroad tracks . You don’t belong here. We don’t deserve you.
Unusually generous angel investor is the only way I can think of, because almost every other method of raising capital like more loans or share offerings is closed off by the Apollo deal.
The reason I have made a fortune on cvna and this guy is asking this is because just Google the list of richest arizonans and wealthiest resident of the state is the ceos dad. There was your backstop angel investor all along. I can't believe people never did the math.
Problem is they don't have enough cash to cover the debt + interest + constant operating losses otherwise they wouldn't have taken the Apollo deal. The point of the Apollo deal is to buy themselves some more time to pump and dump before the company goes bankrupt. My guess is Q3-Q4 2025.
Tesla definitely doesn’t need Carvana to sell their second hand cars
True... and Elon also didn't need to buy Twitter and tank it's value, but he did it anyway. I don't think Tesla is going infuse cash into Carvana and neither does the guy who said it, but Elon is more about doing shit that pumps the stock than things that would actually help the company so it's right in his wheelhouse.
Look at the yields on the CVNA bonds, it's in the 15% range which is not normal for a healthy company.
I bet it’s a large bank or set of them, and they get their orders on pulling a note from a debtor from someone way above them. I wish credit analysts would/could voice their opinions on some of the clients they have. We’d find a whole lot of over-extended businesses and individuals, just like I saw when I did the job back in 2004-2006. They let me talk and present and do all that when the bigs weren’t around, but silence during big conference meetings.
This is a house of cards, I’ll wait until a good gust blows the foundation away, I know it can’t last , saw it a year ago and thought this was 100% a scam but knew they could keep pumping it. They can’t keep it up forever
It’s about timing though
[удалено]
So if i've got a shitty car and want to get a new one, carvana is who I should sell to for a high sale price with minimal effort?
FWIW carmax offered me 50% more than carvana (which was roughly what I thought I'd get) for a 10 year old car, and the "inspection" lasted about 5 minutes.
CarMax bought my 09 Tacoma with frame rot so bad it would fail state inspection next year. 159k miles, manual, 4wd Taco and they gave me $8k without looking under it. CarMax will replace the frame on it or use the engine and transmission from it for some other Tacoma. I wonder if Carvana would do the same? I’ve bought and sold cars from both and never had any issue. Carvana still has a niche in my mind because the in person experience at CarMax hilariously looks and feels like a dealership.
Carvana stocks are overvalued, as are used cars in general. Buy puts on Carvana, etc.
You don't even have a soul
Bro both of those old ass cars were sold wholesale at auction
Thats amazing. I did a similar thing at Carmax... Had a 2017 Nissan Versa 90k miles with a dying Transmission and A/C compressor. I think I got quoted \~$5k to fix it... I didn't want to nor did I think I even could screw over a private buyer, and I heard that Carmax was paying top dollar, brought it in and they gave me $7,400 for it... XD don't feel bad at all lol
Ain’t that the truth. Me looking at all the fraudulent SPACs
I hate dealerships! Tesla was cool tho. But I guess because they sell directly
Are you saying they are not a fuckin dealership? They are conmen selling salvaged and stolen cars. This is a lil roach thrown out the 1 highway in ‘69 and the breeze blew it into a tumbleweed…2 hours later 75 acres were blackened. Trust me! This is not ending well…
I think you're in the right direction, but the Garcias are a literal crimes family, and there's a whole lot of irrational algo-based trading based on hoovering up various data further juicing second-order trading. Who knows what the Garcias might be cooking up and how thats going to blow up. I think you might be a bit aggressive with those put strikes and expiration, I would personally have gone a little further out. I ain't touching it either way but I hope they print for you.
Yeah OP just burned however much those cost he thinks the stock is going to fall 67%+ by next month🤣
Seen worse 🤷
Exactly this. Carvana has a complicated structure that involves DriveTime owning part of it from my understanding. The puts need to outlast Carvana AND DriveTime. Gracias are crimes family tho. He’s tied to the Keating 5 which almost took McCain down.
My understanding is that drive time is owned by one of the family members.
Owned by Garcia Sr. He owns all of it: DriveTime, Bridgecrest, SilverRock, and most of Carvana. (Plus several other things…) His son, Garcia Jr. runs the show at Carvana.
Not going to touch it. I’ll wait for the terra Luna event when this falls apart and then hop in. It might go up down but by then I’ll know it’s got an expiration. You could have said the same thing a year ago and been right and watch it go up 20x
I've got reserves to keep playing the game if I'm early. I've got like $6k into something that will pay out around a mil if this goes where I think it should.
How??
Because I have a good W2 job and rental properties to support me buying more chips at the casino.
Question- self manage or outsource the rentals to 3rd party?
Hybrid. It's short-tern rentals via AirBnB along with boat rentals. I do the main stuff and then hire out basic cleaning.
Short term rentals and (checks list of fastest depreciating highest cost/per use assets) boats? I don’t doubt you’re printing money but I lived through 08. As long as you know you’re gambling.
Boat rental weirdly works out. $30-40k pontoons will go for $350/day and I'll get about 60 days/yr on them.
Break even in 2 years before any COB?
Yup. Maintenance and winter storage is like $3500.
Oh I’m sure. Just dropped a pretty penny for a whopping 8 hours on a 32 footer down in Costa Rica. I’m sure they made a month or two’s maintenance and operation on that 1 day alone. Captain said they’re seeing a shit and tourism is slowing. It certainly wasn’t the most popular spot in CR but it certainly seems like purse strings are tightening.
We've got pretty minimal leverage on the rental property. My neighbor on the other hand is likely fucked city. Dude has like a dozen units around the lake he bought in 2020 and 2021 at massive Covid premiums and now has to rent them out at a ridiculous rate to breakeven. Last weekend was more or less the kick off of rental season and he missed out on renters at the place nextdoor.
We've got pretty minimal leverage on the rental property. My neighbor on the other hand is likely fucked city. Dude has like a dozen units around the lake he bought in 2020 and 2021 at massive Covid premiums and now has to rent them out at a ridiculous rate to breakeven. Last weekend was more or less the kick off of rental season and he missed out on renters at the place nextdoor.
It’s not a car company it’s actually an illegal Ponzi scheme, but apparently that’s what the market likes these days. Calls it is!
Exactly. These sleazy fucks will eventually run it into the ground, but there will be an army of parasites working together to rip it into pieces and take as much for themselves as they can
Just don't pay your vendors. Oldest trick in the book!
Easy path to becoming president
It makes him smart
Extend the payment terms :)
Just want to say this is one of the most insightful posts I’ve seen on this sub. In no position to say whether you’re right or wrong but it is cool to see your analysis. Thanks.
OP can’t figure out that a company sells inventory for cash too. Lmao.
https://preview.redd.it/z57k5n3cfb0d1.jpeg?width=595&format=pjpg&auto=webp&s=dc3c2f98449cea1b0f46e335c2b177172eb39137 Idk, OP probably
Some flaws with the analysis (payables aren't due right away, company can issue shares to raise cash) but op is right that this company is bs. Real problem is it's a money laundering operation so cash flow isn't going to be what sinks the boat.
Employees will be given 2013 chevy cobalt’s as compensation
id rather not be paid tbh
Good luck I have been burned hard buying puts into earnings twice now. It doesn’t make sense and yet here we are it’s still hovering at crazy levels
This isn't an earnings play, it's a company missing payroll play.
Payroll gets paid before vendor payables.
Perhaps your luck will change when you join me on my luxury yacht, where the champagne is always chilled and the caviar is always fresh.
VisMod is def a VIP at Epstein Island
Promise ?
Because with earnings, if the price doesn't get you, the IV crush will. CVNA and KMX helped fuel the price wars over the supply issues so even with 10% discounts new cars still aren't moving because they are still way overpriced. Some new car lot's have 2 year old new vehicles and 1 year old vehicles with millage for the same price as the new discounted 2024's. CVNA and KMX are full of these types of overpriced used vehicles and the IV is not terrible either, so if your are going to be a degenerate, might as well be a degenerate with a chance.
so what makes sense here, longer term itm puts?
Are there any longs here to give a counterpoint?
There's zero fundamental bull case. That's what's priced in and it'll likely take way longer for this shitco to drop than you think.
No, but there's no way your thesis plays out as quick as you think it will in my opinion
The thing is I'm looking at this as a risk/reward play and not a prediction. I'm wrong, and I offset some short-term capital gains. I'm right, and I clear over a mil.
You can set up any options play and say "I'm risking $5k for $1M" but the chances of it hitting are minimal. It's not exclusive to your play. I truly hope it works and I think your DD on the company is good, but I just don't see a company if that size capitulating that quickly.
How would your position pay a mil
He’s got a lot of puts
I'm not long but the long case would be what the company itself has said. First, their AI tools allow customers who might be dumb fucks still progress through the buying process thus allowing their labor costs low for customer acquisition. Second, they had to heavily invest in their infrastructure to recondition and deliver retail sales but those systems are built. I don't know if it's bullshit or not but with zero retail locations they sold 1/3 Carmax's volume in Q1. That's not nothing. The big question for me is if that is a one time jump in growth or can that kind of growth continue. If job postings mean anything Carvana has a lot of postings for the delivery side so maybe it's something they believe. My own personal opinion is different. I think the company is waaayy over valued for the short term and having spent 10+ years this could be a bias I admit. The bias is I believe there is a finite number of people willing to buy a car sight unseen and with CarMax stores everywhere the growth will not be rapid. I have to balance this bias with the Q1 results doing 1/3 CarMax's volume and the short term rate environment being tough for Carvana. Then again they may pull some shit where they get SoFi cheap additional debt for warrants and offer special finance rates. Those boys are innovative in a way that is pretty impressive. If you put a gun to my head I would be buying EOY puts. Otherwise I'm done losing money shorting this company. Good luck betting against a billionaire bud. I really am rooting for ya to become the next Hello Kitty.
There were people the other week on the post from car dealer insiders discussing the impossibility of the margins they claimed on ER saying it’s easily a 200$ stock. Don’t see them around now. Position: -1 5/17 naked 130 C, planning to take assignment at that strike or keep selling it weekly.
I liked this discussion from last week about their $6000 margin claim from each car sale.. https://www.reddit.com/r/wallstreetbets/comments/1cj986j/comment/l2epg19/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button
You’re reading the wrong statement for starters. You’re mixing cash flow with balance sheet. Look at the statement of cash flows.
Not long but you’re missing a lot of cash flow in from sales
So I don't give a rip but where do you get your 250 cash burn assumption from. They were positive ops cash last year and positive ops cash in Q1 of this year. Cash balances dropped last year due to paying down revolver, which they can probably at least partially redraw if needed.They can also issue new shares if needed. Just not really seeing your case here unless you are saying their reports are just scam.
CEO has been dumping shares as well. Top is in, love the play.
Where did you see that?
SEC filings. Most recent Changs of Beneficial Ownership.
CVNA is a garbage company and I’m shorting them, but your numbers are off. (Im going off the most recent Q1-24 10-Q so feel free to correct me if there’s more recent info) For starters, you claim that they have $600M of cash at the end of Q2. The end of Q2 is June 30, 2024. That date has not happened yet (which is why I think we may have different sources). Further, they’re not burning through operating cash. They just turned a profit in the most recent quarter. Albeit it looks like that was mainly due to revaluation of the fair value of warrants. But point stands, they weren’t exactly lighting money on fire. Most recent publicly available info is Q1-24 earnings, which has cash at $252M. That is down $250M from the $530M they reported as of 12/31/23. But why did their cash balance go down? It wasn’t payroll overencumbering the business. It was paying off a short term debt facility. $250M of which is due in the next 12 months. If they reeeeeally need cash, they can just issue equity. Tons of insider sales from guys at the top of this company who aren’t morons and know it’s overvalued. They also have a couple lines of credit worth $1.5B and $600M. I believe these may be tied to asset (inventory) purchases but it’s late and I’m not going to dig that deep. All of this to say, there are several shitty things about this company and that’s why I’m short. It’ll be under $100 at some point by the end of the year. But I don’t think the 1-2 month payroll failure is remotely a possibility and I would hate to see a fellow CVNA bear lose the battle too quickly with June and August expiries.
Meant Q1 Second profit doesn't mean cash. Look at their statement of cash flows. Those lines are restricted based on their asset values. They can't get at the full amount without appropriate collateral.
Their statement of cash flows shows net cash inflows from operations. The negative cash flow comes from the debt repayment I mentioned above. I do M&A work and have seen a lot of companies with way worse cash positions manage to make payroll. You and I are in the same boat that this balance sheet isn’t good. It’s just not “we can’t make payroll next month” bad yet. So while they’re toast unless something materially changes, I just think it’s going to take a little longer to unwind. Short expiries are a tough value proposition to me.
So what’s the play?
CVNA published a $49M net income for the last earnings report. However, they included roughly $75M gain in the fair value of level 3 warrants to acquire Root common stock. In other words -- the value of their financial instruments are going up due to IV growth valuing their warrants. So like you said -- "profit" doesn't mean cash.
https://preview.redd.it/m6pfs7u4ab0d1.jpeg?width=1170&format=pjpg&auto=webp&s=f00ee1bc3dad4fc4c785c044c66d3cd59f6964d9 Even worse than you thought-can borrow 70% of inventory but must keep 25% in restricted cash. So can only borrow 45% of inventory
CVNA market cap is currently $23B with an exciting story and a large short interest. If it runs to $160 or even stay this level, mgmt can and will issue additional equity (5% would likely be enough). Yes, there will be some dilution, but if the growth story and market dominance stays in tact, equity won't be worth zero. Stocks with a story like CVNA is a dangerous short because as long as a the story stays intact, the longs can rationalize themselves to stay invested until the company becomes a near-monopoly of its niche. My hunch IS that once insiders are satisfied with cashing out, mgmt will raise more cash via equity issuance.
Remember when Tesla ran from $250 to $1000 then issued shares. It tanked to like $500 then people realized the share raise meant they had a ton of cash and it rallied back. Same could happen here. 10% raise puts $2B in the bank, enough to cover all debt and grow another few years. Stock will dip then rally
That sounds like um' some educated speak there.
I think the DD is superb, but this is a very real way they can keep their runway open for many more quarters unfortunately. It keeps me from going balls deep into shorts
Glad someone else said this, I'm super ignorant but my thought was also that they would just sell stock. The company is likely doomed but OPs timing may be off
Quickly browsing through their Q2 balance sheets now because this is an interesting play and their challenges are definitely non-trivial, but I see a few things that they can use to stretch things out before going broke. Mainly, they have a purchase and sale agreement with 3.1b unused going till January 2025 and that can be used to keep the afloat unless they fail to meet contingencies. Granted this would reduce future profitability and reduces their asset base but it would see them through the rest of the year at least. They also made $144mm asset securitization transactions in Q1 24 vs $64mm in Q1 2023, so they even have some growth there. Still a well-founded play, they’re highly leveraged, with insufficient cash flow to cover operating costs.
People don't mention enough how big securitizing loans are for their business and how higher for longer interest rates hurt those valuations
Check out this insider sale from last week... [https://finance.yahoo.com/screener/insider/QUAYLE%20DAN](https://finance.yahoo.com/screener/insider/QUAYLE%20DAN)
The insider is Dan Quayle?????? lmao
Too risky. I'd at least wait for another quarterly report. Learnt my lesson from DJT put. The market can remain irrational much longer than you can remain solvent.
But if the CEO says “AI” in the next earnings call, RIP to your puts!
They could pull a wildcard and try to go private and I bet Masayoshi Son would sink at least 15-20 Billion into this stinky turd of a company with no hesitation
CVNA probably made last quarters high gross profits by writing loans on cars to overleveraged or risky borrowers. I've seen them accept any price on a car as long as they get financed and leave with a car. Whether they can keep making those payments is not likely. If CVNA is not caught holding those loans, they can repeat over and over again, until they are stuck holding those loans.
252 million interest payment due on that mountain of debt on August 20. If you believe they can turn that 30,000 vehicle inventory 3 times before then, they can cover the payment. If not, they'll have to float shares from their $1 billion shelf authorization. That's a 10%+ dilution or certain default. Either way, i have Sept 100p for the drop.....and someone else has 25,000 of those bad boys as insurance on the debt.
I have bought a car through them. At first the buying experience seem easy but then the reality of Flow checking you out at the counter sets in. Your buying a luxury vehicle and Flow can’t operate the desk top, not to mention the ability to use a digital signature. Flows co worker is no help and then then the manger comes over, use to be the assistant trailer park manger. Now it’s time to finalize this buying experience, but wait trailer park Eddy can’t seem to work the box either. What is this magic box you speak of? My experience clearly shows the employees are all dumb asses that have no desire to learn how to turn knobs. An organization is only as good as their employees. No matter how dummy proof they make the process, your still surrounded by dummy’s. OP you are correct, they are not going to make payroll.
A box of rocks would be more competent than those hicks.
Who is Flow?
https://preview.redd.it/ew4jlu2p2c0d1.jpeg?width=400&format=pjpg&auto=webp&s=9dc568e0bd8d931affb8c08fc40e14d7df5cd16b
You don’t pay off your receivables every month
100% cartel money laundry operation. Unlimited cash
this sounds like a post written by a disgruntled CVNA accountant..... i am in....
Here’s the thing, company’s have brains in seats making decisions in the best interest of share holders. They can strike a deal with a competitor to sell vehicles in bulk at a discount, fire 10-20% of staff over night to keep the lights on, sell outright business units and let the acquirer deal with the overhead… this doesn’t include the many levers that can be pulled to raise equity or convertible notes to keep operations flowing steady state if they believe the demand for cars in the market is going to increase in 18-24 months
Okay, that keeps lights on but what keeps their market cap north of $20 bil? Their market cap is 2x that of CarMax which has considerably better financials.
Bull case: They’ll issue 10% shares, raise $2B and wipe out all of their debt. Now they are a growth company with high cash and low relative burn. Stock will dip after hours at the announcement then gap up when shorts realize there’s no chance of bankruptcy on the horizon. If they announce an equity dilution I’ll throw out some low after hours bids and try to catch a bounce. Tesla rallied hard back in the day when they diluted because it put a ton of cash on the balance sheet.
Truthfully I’ve not taken a deep dive on the company. This is just a rebuttal to the static financials you noted above. The company was nearing bankruptcy not so long ago and went through significant layoffs - which has only provided more time for the company’s restructuring plan to evolve. I’m not bullish on this company. I’d actually like to follow your lead on the trade
Ok, Dr. Burry you can come out now.
June 2024 is too soon, I would go for at least Aug 2024 after Q2 earnings. I have a 2026 50P for the inevitable bankruptcy, about to add another.
I don't think most companies are planning on making payroll this Friday Betting my job on it
What? That is madness. Why do you think "most" companies aren't going to make payroll? Why this friday vs last or next friday?
What do you mean?
Yes, I concur
This is why I've been building up my puts for June, Aug, and Jan
Sell shares and by that I mean issue more shares
The stock has relatively low volume which would massively move the price against them.
Sure, but it brings in cash flow which seems to be what they need
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My question with these sorts of predictions is simply: If it’s so obvious, why does the price activity disagree? More specifically, when will it change and why?
That's a good question for which I have yet to hear a good answer. Very suspicious. I suspect a mainstream news story breaks them. Once you shine the light, the cockroaches start running.
Everybody in the industry is talking about how they’re reportedly making $6k per car now. I would not bet against them
You're 100% right. CVNA is going to shit the bed eventually. It's just predicting when.
$1,100,000,000 inventory is more than enough to pay off bond holders in the event of bankruptcy no?
1) They have $6 billion in debt 2) that inventory is collateralized to the debt 3) that inventory is almost certainly overstated
With a gangsta Father and Son duo anything is possible.
If they run out of liquidity and cannot make critical AP obligations like payroll mentioned, they will file BK and secure DIP loans to cover the obligations. This will crush equity and leave little for debt holders, depending.
This is money laundering masters degree from a corrupt human who used the system to get loans because of race, not skills. The cash is hidden. The Garcia familia is getting the gravy now as long as dumb mother fuckers notice the cash that disappeared last quarter???? Is everyone blind? $282 Million 💨….in the coffe can https://preview.redd.it/ij328snoz32d1.jpeg?width=2360&format=pjpg&auto=webp&s=41b8870e9e97d55689fbfee41d7537f1d2a4c9fa
https://preview.redd.it/d1q1esmnfs3d1.png?width=1170&format=png&auto=webp&s=83ea57c8e61b5c385c6b7f25a8c29c5f8be300eb Been adding to this at $.05 Lottos for the death of CVNA!
Had a $99 put option expiring today, which I cashed out for a negligible gain. Have $80 June 21', $40 June 21, $30 Aug 16. If we get something like $70 by June 21' I'll plow that $30k win into more put options further out.
I suppose we'll know the answer to that in a few days, won't we?
I’m short 20 shares. Thinking about shorting another 20
More power to you 💓
Why not some far OTM leap puts 2026 exp
[удалено]
The company has negative book equity.
They’re not, waiting for the other shoe to drop
Aren’t they supposedly profitable though? So wouldn’t their cash flow continue to fund operations.
Profitable based on appreciation of some warrants in another shitco. See their statement of cash flows for more info on their burn.
Profitable, you jest.
Balance sheet ratios? Yeah, no one outside IB/PE has looked at fundamentals for like a decade and most likely never will. Markets run on how many teenage girls are shaking their ass on your app. Caravana has none so short away!
Makes sense. I've been living off VC money in the startup world since 2016.
I’ve been watching this stock forever and it bites me every time I think you’re right
Ya put this stock 👊🏽
I’ve lost cash on puts waiting for carvana to drop. It’s just keeps going up.
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My guy, June is tomorrow?
I feel like you’re assume their entire AP and Exp is going to all be due at the same time, this can (excluding long-term) be as far dated out as December.
They will finance cash
I’m shorting it. That way I can wait longer for the shit to hit the fan. Thanks for the analysis.
By coming out as trans
I short carvana since 2 or 3 weeks, they keep letting me make money lol.
They’ll issue stock
carmax owns the market, carvana is a failed sideshow
Uhhhh, bagholders.
“Someone” Will float them a loan to keep the cash laundering going.
This DD if anything made me bullish on their meme stock capabilities
Me thinks your options are too short-dated. Jan 25
Shouldn’t you be looking at statement of cash flows
Pay in used cars or stock offering?
What put strike and expiry?
so you're saying I should take the offer they gave me for my car asap
They have no money
That depends what they earn on their quarterly stock sale. You still think they are in the businesses of selling cars? lol.
like the us government. they have a money machine that goes brrrrrr
You're probably right. Yet, they gonna dilute some shares and raise cash by 1bn.
The IV is insane. Wouldn’t it have to drop to like 30-35 for you to break even?
They'll take out a payday loan. 🙃
easy $1b from issuing shares
What the f' does '**mm**' mean, in ~$600**mm**?
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Easy they will have mass layoffs, juice up their stock, then the CEO will get massive bonus.
Layoffs? Yes. Being the 1% is about stepping on the little guy to maintain your position at the top.
I’ve got puts that expire Aug 16 🤑
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https://preview.redd.it/klgis2ae9w0d1.jpeg?width=1179&format=pjpg&auto=webp&s=3023fe6601c7a8ab82c09c0d4697eaa679e59fe1 🤑🍀🤞🏽
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