Carvana Sinks 7% In Pre-Market On Public Offering Of 5M Shares


Carvana (CVNA), the e-commerce platform for buying and selling used cars, has announced a public offering of 5,000,000 shares of its Class A common stock.

The stock closed Monday’s trading at $98.59, and is currently falling 7% in Tuesday’s pre-market trading. According to Bloomberg the offering will be within the price range of $93-$96 per share.

“The underwriters will offer the shares from time to time for sale in negotiated transactions or otherwise, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices” the company stated.

Citigroup and Wells Fargo Securities will act as book-running managers for the proposed offering.

Carvana intends to use the proceeds for general corporate purposes and to partially repay borrowings under its floor plan facility.

“While COVID-19 headwinds are apt to persist nearer term, we increasingly believe that on the other side of the crisis, a sustained, even more-favorable backdrop for preowned vehicles and well-positioned, digitally-driven players, such as CVNA will take hold” comments Oppenheimer analyst Brian Nagel.

He recently reiterated his buy rating and ramped up his Carvana price target from $95 to $127, arguing that CVNA should prove capital self-sufficient and generate meaningfully positive adjusted EBITDA in 2022.

Nagel admits that Carvana shares are not inexpensive, but believes investors will “continue to seek long-term growth and safety in equities of firms situated to thrive amid now-rapidly shifting consumer dynamics.”

Overall the stock has a cautiously optimistic Moderate Buy consensus. With the stock up 7% year-to-date, the average analyst price target suggests 11% downside potential lies ahead. (See CVNA stock analysis on TipRanks).

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