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Tag: Carvana Co

  • Stocks making the biggest moves premarket: Uber, Coinbase, Spotify, Alaska Air and more

    Stocks making the biggest moves premarket: Uber, Coinbase, Spotify, Alaska Air and more

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  • Crypto-focused bank Silvergate is shutting operations and liquidating after market meltdown

    Crypto-focused bank Silvergate is shutting operations and liquidating after market meltdown

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    Omar Marques | Lightrocket | Getty Images

    Silvergate Capital, a central lender to the crypto industry, said on Wednesday that it’s winding down operations and liquidating its bank. The stock plunged more than 36% in after-hours trading.

    Silvergate has served as one of the two main banks for crypto companies, along with New York-based Signature Bank. Silvergate has just over $11 billion in assets, compared with over $114 billion at Signature. Bankrupt crypto exchange FTX was a major Silvergate customer.

    “In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward,” the company said in a statement.

    All deposits will be fully repaid, according to a liquidation plan shared on Wednesday. The company didn’t say how it plans to resolve claims against its business.

    Centerview Partners will act as Silvergate’s financial advisor and Cravath, Swaine & Moore will provide legal services.

    The liquidation comes less than a week after Silvergate discontinued its payments platform known as the Silvergate Exchange Network, or SEN, which was considered to be one of its core offerings. As part of the liquidation announcement, Silvergate clarified that all other deposit-related services remain operational as the company winds down. Customers will be notified should there be any further changes.

    Silvergate said last week it would delay the filing of its annual 10-K for 2022 while it sorted out the “viability” of its business. The company disclosed that the delayed filing was partly due to an imminent regulatory crackdown, including a probe already underway by the Department of Justice.

    Silvergate also attributed the delay to Congressional inquiries, as well as investigations from its banking regulators, which include the Federal Reserve and the California Department of Financial Protection and Innovation.

    Crypto companies like Coinbase and Galaxy Digital raced to cut ties with Silvergate last week after the bank warned that it was unsure whether it could stay in business.

    Silvergate has been struggling for months. In addition to laying off 40% of its workforce in January, the firm reported a nearly $1 billion dollar net loss in the fourth quarter following a rush for the exits at the end of last year that saw customer deposits plummet 68% to $3.8 billion. To cover the withdrawals, Silvergate had to sell $5.2 billion dollars of debt securities.

    The firm went to the Federal Home Loan Bank for an additional $4.3 billion. That loan drew attention from lawmakers like Sen. Elizabeth Warren, D-Mass, who said this “further introduced crypto market risk into the traditional banking system.”

    Investment firms Citadel Securities and BlackRock recently took major stakes in Silvergate, buying up 5.5% and 7%, respectively.

    WATCH: Silvergate plunges in pre-market trading after delaying its annual report

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  • Here are Friday’s biggest analyst calls: Apple, Amazon, Meta, Nvidia, Carvana, Delta, Walmart & more

    Here are Friday’s biggest analyst calls: Apple, Amazon, Meta, Nvidia, Carvana, Delta, Walmart & more

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  • Carvana shares tank as bankruptcy concerns grow for used car retailer

    Carvana shares tank as bankruptcy concerns grow for used car retailer

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    Ernest Garcia III, CEO of Carvana, speaks to CNBC on the floor of the New York Stock Exchange, March 7, 2019.

    Brendan McDermid | Reuters

    Shares of Carvana plummeted by more than 40% in Wednesday morning trading after the embattled online used car retailer’s largest creditors signed a deal binding them to act together in negotiations with the company.

    The pact, as first reported by Bloomberg, includes creditors such as Apollo Global Management and Pacific Investment Management that hold around $4 billion of Carvana’s unsecured debt, or about 70% of the total outstanding. The agreement will last at least three months.

    Such creditor agreements are viewed as a way to streamline negotiations around new financing or a debt restructuring. They have assisted in preventing creditor fights that have complicated other debt restructurings in recent years.

    A person with knowledge of the situation who is not authorized to speak publicly on the matter confirmed details of the deal Wednesday to CNBC. They downplayed the deal signaling any increased concerns for bankruptcy, citing the company’s meaningful liquidity runway.

    Following the creditor deal, Wedbush analyst Seth Basham said Wednesday that bankruptcy is becoming more likely for Carvana and downgraded its stock to underperform from neutral and slashed his price target to $1 from $9 per share.

    JPMorgan said Wednesday that the creditor deal signals that Carvana “may have initiated debt restructuring negotiations with bond holders” but the “possibility of imminent Ch. 11 filing seems low.”

    “We believe CVNA has enough cushion through shortterm revolvers to get through till end of 2023, and a severe recession could accelerate this by 1-2 quarters,” Rajat Gupta said in an investor note.

    Carvana did not immediately respond for comment. Pimco and Apollo declined to comment.

    Trading of Carvana shares was briefly halted Wednesday morning after the stock fell below $5 a share for the first time since the company went public in 2017. The stock fell below $4 a share after the halt was lifted. Carvana’s stock has plummeted by about 97% this year after reaching an all-time intraday high of $376.83 per share on Aug. 10, 2021.

    Carvana has received a litany of analyst downgrades since the company reported disappointing third-quarter earnings last month and gave a bleak outlook.

    The company grew exponentially during the coronavirus pandemic, as shoppers shifted to online purchasing rather than visiting a dealership, with the promise of hassle-free selling and purchasing of used vehicles at a customer’s home.

    But Carvana did not have enough vehicles to meet the surge in consumer demand or the facilities and employees to process the vehicles it did have in stock. That led Carvana to purchase ADESA and a record number of vehicles amid sky-high prices as demand slowed amid rising interest rates and recessionary fears.

    Carvana has repeatedly borrowed money to cover its losses and growth initiatives, including an all-cash $2.2 billion acquisition earlier this year of Adesa’s U.S. physical auction business from KAR Global.

    Last week, Bank of America downgraded Carvana to neutral, saying that the company badly needs more liquidity as it struggles to turn profitable. Analyst Nat Schindler said the company “is likely to run out of cash by the end of 2023. There is no indication yet of a potential cash infusion.” 

    And last month, Morgan Stanley pulled its rating and price target for the stock. Analyst Adam Jonas cited deterioration in the used car market, company’s debt and a volatile funding environment for the change. He also said the company’s stock could be worth as little as $1.

    — CNBC’s Michael Bloom contributed to this report.

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