Shares of Carvana Co fell 40% in morning trade on Wednesday after Wedbush raised the possibility of a debt default by the used-car retailer, which would increase the risk of bankruptcy, and cut its price target to a Wall Street low of $1.
Dec 7 - Shares of Carvana Co
Brokerage Wedbush also downgraded its rating on the stock to 'underperform' from 'neutral,' sending Carvana's shares to a record low. Carvana's bonds have been under pressure this year, with notes maturing in 2025 trading at 45 cents on the dollar, slightly above the record low of 40 cents hit a month earlier. At the start of the year, they were trading at 97 cents on the dollar.
Combined with the departure of Carvana's director of investor relations, Wedbush said it believed the developments indicate a higher likelihood of debt restructuring that could "leave the equity worthless in a bankruptcy scenario, or highly diluted at best."
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