I am not feeling the acquisition finalizing. For a multitude of reasons. First and foremost I can’t imagine them being able to attract enough investors to raise that part of the funds. We are talking about a company that posts loss after loss. Secondly I’m starting to think Garcias don’t wholly give a shit if they acquire Adesa. Starting to seem like that was to prop the price up at their first earnings.
However it could happen. But I don’t see any ramp up in their ticker pricing anytime prior to the closing.
@The_Ni and @hansolo thanks for all your efforts on this thread. Has been a good one for us all I hope. I am still holding 1 40p for may 20th and 3 50p for same expire. Feel like worst case scenario I can exit these and still be largely in positive overall if things go backwards after exiting my 71s today
Picked up some 5/20 50P for CVNA. The downward step thing has been happening pretty reliably over the last month and five days, so this may end up being an overnight scalp.
The spike yesterday on Apollo’s 1.5B debt buy getting immediately clubbed down makes it seem like this thing will just keep going down until it flattens out, but almost impossible to think of something that will make it go up. So will try to scalp this often.
Closed out my commons short today as I was worried the market might bounce tomorrow on the back of APPL and AMZN earnings which turned out to be somewhat unfounded.
May look to enter some puts tomorrow depending on how we open. I think if the broader market weakness persists this has a chance of retesting today’s low of day and potentially broach 55 or 50 levels
Closed my may 20th 50p today at major drop this morning. They were way too green not to. Also sold the 40p that was up nearly 60 percent. I did get a may 6th 60p once it bounced back over 60 but then kept running up so I grabbed another to average down a bit. And as you said it almost inevitable tumbles every morning. I agree don’t foresee anything changing it’s direction anytime soon. So will keep trying to sell the puts on morning drops.
I bought a 60 strike for next week. Expecting SPY to tug this down with it. If this happens, I’ll likely get into longer term puts or wait for this to be funny and try to rally.
I believe this was part of the fundraising with the junk bond selling. They disclosed last week they were putting up some of their own money for the acquisition of Adesa and would buy the preferred shares. Also substantially smaller percentage than the amount of shares they sold at 200-300.
CVNA broke off the general market a little overnight premarket was down 4 percent after its first relatively strong day as of late yesterday. It stayed down and never bounced. Have pretty consistently been able to get good put entry’s. More hesitant this week as I don’t know when it finds bottom. I think it has further room to drop. As it’s still most likely overvalued. Also was downgraded to their lowest PT yet. And doesn’t leave much upside from its current pricing.
Gonna flip the script here on the market reversal. Although I think this company is garbage and ultimately heading towards bankruptcy and no existence. Todays reversal on bullish FOMC news in my opinion. Not many companies have been hit harder than CVNA 50% decline in 1 month. Although I think overvalued. Don’t feel the drop anymore without some kind of bearish catalyst. However the closing of the Adesa deal in the eyes of most is a bullish short term catalyst seems to be going to happen with junk bonds and fundraising. Got a good pop on the news they were purchasing for short term I may take a 70c or 2 here for end of may tends to pump with the market and I think we are in for a pump. As much as it pains me personally to bet on an upside. We play both ways to make money.
Thanks to the 17% dump CVNA took today, while was no doubt helped by the SPY bleed-out, the 50Ps I got 7 days earlier got limit sold for 2x again. Fourth swing so far.
The Garcias keep on giving. Will wait for another green day to load up again.
Fwiw, much put buying today too, which probably helped make the premiums go that wee bit higher.
Nice job. Today was the first day in weeks that I haven’t had CVNA puts in my port at some point. However didn’t wholly expect the entire market to tank.
So I got to kicking this around today trying to divulge a strategy here instead of kicking myself for not having puts for its single greatest day drop since We started playing it. Although I am very greatful to the Garcia for the gifts they have given. It seemed to trend downward more than a lot of the market. I mean essentially almost everything down however CVNA was down nearly 20 percent.
My consensus is with rapid rate hikes incoming confirmed. This tends to hit housing and automotive the hardest because those are the two biggest things people borrow money for… As we have already established above these guys are bleeding cash daily and riddled to the gils in debt. They admittedly over paid for inventory in Q1. Most of which is floorplanned or essentially margined to a creditor that they pay a small amount of interest on. With rate bumps floorplan rates bump. This means their daily cost of doing business is on the rise. With cash flow already negligible and cost of business rising. It leads to even more money.
Secondly on the riddle with debt portion. They have tons of it and means cost to borrow likely increases for them. Rate increases are intended to slow demand. Well if you are heavy in any inventory already and demand stifles. You are essential screwed. If automotive market and values drop through the floor these guys are in a world of hurt. And I think that is what investors realized. I was a bit cautious here with its run up with market yesterday. But I do think after more thought rising rates are just throwing fuel on the fire for these guys.
The pattern with CVNA seems to be that it has spurts of positive days, but inevitably, it is dragged down. So I’ve stopped getting puts that are anything less than 21 DTE or so.
There is a certain inevitability to the demise that is captured across a range of factors:
Price action, of course (Fig 1)
The latest junk bond has gotten … junker - yield is now > 11%. (Which is more of a sign of the market’s discounting their credit worthiness even more than what they tried to capture - they still pay the 10.25%) (Fig 2)
The latest bond covenants were structured specifically with bankruptcy in mind, and restructuring specialists Apollo took > 1B of those. Garcias have also bankrupted previous car dealerships and bought the assets back pennies to the dollar.
Unless a miracle happens and they 2-3x their cashflow, as you note, they will simply run out of cash.
Now, they have bought a few months with all this cash, so next time I go in I will probably even longer DTEs, but it is difficult to see how they do not undertake serious restructuring, all the way to bankruptcy, by Fall.
. Craziness. Halted now it looks like
