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Kerrisdale Capital reveals short position in used-car firm Carvana

Published 02/26/2024, 11:32 AM
Updated 02/26/2024, 03:20 PM
© Reuters. Carvana logo is seen in this illustration taken June 27, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

(Reuters) -Investment firm Kerrisdale Capital disclosed a short position in Carvana on Monday, calling it a "poorly capitalized, growth-challenged auto retailer".

Shares of Carvana have surged nearly 40% after the used-car retailer posted its first annual profit last week, a sharp turnaround powered by cost cuts and a debt-reduction deal with bondholders. On Monday, shares of the company were up about 3% in afternoon trade.

"Carvana’s valuation was already stretched – now, its share price is so ridiculous that it doesn’t just trade at levels unheard of for an auto dealer, it trades at a premium to leading tech companies," Kerrisdale Capital said in a statement.

Carvana had $2.32 billion in short interest, or 39.6% of its free float in short position, as of Friday, according data and analytics firm Ortex.

© Reuters. Carvana logo is seen in this illustration taken June 27, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

"In addition to the disappointing growth outlook, there are signs that further improvement in unit economics is nearing an end," Kerrisdale Capital said in a statement.

Carvana declined to comment on Kerrisdale's report.

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