Shares of Carvana (NASDAQ:CVNA) have plunged lower by more than 95% this year, and large shareholders are taking notice. The decline has been led by lower used car car prices, inflation and a lack of profitability. Meanwhile, Carvana’s bond prices declined to less than 50 cents earlier this month, striking fears of a default.
On top of that, it was recently announced the company’s creditors, which includes private equity firm Apollo Global Management, had signed a pact to work together when making negotiations with Carvana. This led to shares of CVNA stock plunging by more than 40%. The creditors own around $4 billion, or 70%, of the company’s unsecured debt, while the pact will be in effect for at least three months.
Shortly after, Carvana sought to quench fears by releasing the following statement:
“Our message to our customers, shareholders, employees and other stakeholders remains clear: we are singularly focused on executing on the plan to profitability outlined in our third quarter shareholder letter and we have substantial liquidity to get us there. In no way do these reports change that strategy.”
However, large shareholders are taking notice of the company’s declining financials. Let’s get into the details.
T. Rowe Price Capitulates on CVNA Stock
T. Rowe Price (NASDAQ:TROW) has sold 99.84% of its existing CVNA stake according to a 13G form received by the Securities and Exchange Commission (SEC) on Dec. 12. That’s equivalent to the sale of 13.42 million shares, as the firm previously held 13.44 million shares, which fell to just 20,982 shares as of Nov. 30. T. Rowe’s sale was very significant, and investors should take note of it.
On the other hand, Morgan Stanley (NYSE:MS) took a different approach. As of Nov. 30, the investment bank held 13.11 million shares. Morgan Stanley previously reported owning 5.3 million shares, which means it increased its stake by 147.26%, or by 7.81 million shares.
CVNA stock carries an average price target of $16.59 among 17 analysts with coverage. That would imply upside of more than 200%. However, the last six updates to analyst ratings have all been downgrades. Earlier this month, Wedbush analyst Seth Basham reduced his price target to a Wall Street low of $1 from $9.
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.