Insiders Are Buying Carvana (CVNA) Stock. Here’s Why.

  • Carvana (NYSE:CVNA) Director J. Danforth Quayle purchased $900,000 of CVNA stock
  • Other insiders have been active as well, such as CEO Ernest Garcia III
  • However, used car prices have steadily declined since January
Carvana (CVNA) logo on white object in foreground as well as a high-rise building in the background
Source: Jonathan Weiss / Shutterstock.com

Insiders of Carvana (NYSE:CVNA) have been buying the dip this year. Shares of CVNA stock have declined by over 80% year-to-date (YTD), as the price of used cars has fallen steadily since January. In April, the Manheim Used Vehicle Value Index declined by 1% month-over-month. Since January, the index has declined by 6.4%. Despite the steep drop, the index remains up 14% on a year-over-year (YOY) basis.

Cox Automotive Chief Economist Jonathan Smoke told CNBC, “We clearly have returned to vehicles depreciating again. That’s a good news story for both inflation and for consumers looking to buy a vehicle.”

Carvana’s executives and directors clearly seem unfazed by the falling prices of used vehicles, as is evident from their recent purchases.

Insiders Are Buying CVNA Stock

On May 16, J. Danforth Quayle purchased 4,168 shares at an average price of $38.40 per share. The next day, Quayle purchased another 18,750 shares at an average price of $39.14. In total, the transaction amounted to just under $900,000. After the purchase, the director directly owns 4,832 shares of CVNA. He also owns 23,310 shares through trusts with which he is affiliated.

Last month, Carvana announced a public offering of 15,625,000 shares of its Class A common stock priced at $80 per share. Carvana CEO Ernest Garcia III took it upon himself to purchase two million of these shares on April 26. Of the two million shares purchased, the CEO directly purchased 300,000 shares. The remaining 1.7 million shares were purchased through trusts with which he is affiliated.

Meanwhile, Garcia’s father, Ernest Garcia II, wanted a piece of the public offering as well. Garcia II owns a more than 10% stake in the company and is therefore classified as an insider. He directly purchased 3.36 million shares at $80 per share. Garcia II also indirectly purchased 37,500 shares through Verde Investments, which he “wholly owns and controls.”

Notably, the Form 4 shows that Garcia II purchased 1.7 million shares indirectly through trusts with which he is affiliated. This is the same transaction that occurred on Garcia III’s Form 4, since they are both affiliated with the same trusts.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


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