Carvana (NYSE:CVNA) stock is plunging 38% today and trending on social media. The troubled online auto dealer’s shares are tumbling after Bloomberg reported the company’s largest creditors had signed an agreement regarding restructuring talks.
In a note to investors, investment bank Wedbush responded to the news by downgrading CVNA stock and warning that the chances of the company going bankrupt have risen.
CVNA Stock Top Creditors Make a Deal
According to Bloomberg, ten firms that hold 70% of Carvana’s debt signed a deal which will mandate they only reach a single, unified agreement with the auto dealer. The agreement is supposed to prevent divisions and arguing among the creditors during the negotiations, explained the news service, which did not identify its sources for the story.
BlackRock (NYSE:BLK), Pimco and Apollo are among Carvana’s largest creditors.
Wedbush analyst Seth Basham responded to the news by lowering his rating on the shares to “underperform” from “neutral.” Noting that many of Wedbush’s bonds are changing hands at roughly 50 cents on the dollar, Basham thinks in the wake of Bloomberg’s report, the chance of Carvana restructuring its debt has increased. As a result, CVNA stock could become worthless or be “highly diluted in a best case,” he warned.
The analyst slashed his price target on the shares to just $1 from $9.
On Nov. 30, Bank of America cut its rating on CVNA stock to “neutral” from “buy.” The firm warned the company would probably not have any cash left by the end of 2023. However, the bank did state that it remained upbeat on the company’s business model.
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On the date of publication, Larry Ramer 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.