Carvana has become America’s worst-managed company. CEO Ernie Garcia III and his father Ernie Garcia II have done irreparable damage to their shareholders. It shows in the stock price. Its 52-week high is $376.83. Today, the stock trades at about $66. The carnage is almost unimaginable. It is time for Garcia to turn over management to an outside professional to engineer a turnaround.
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The latest fiasco involves financing with Apollo. It is part of a private placement of $3.275 billion in aggregate principal amount of its 10.2500% senior unsecured notes due 2030. According to The Wall Street Journal, Apollo took on about half the total sum. “The deal with Apollo is an acknowledgment that filling the hole in its balance sheet had taken precedence over growth,” a writer at the paper noted.
Carvana’s most recent quarter was stunningly bad. The company’s unit sales barely grew to 105,185, up by only 14% from the same period a year ago. The company lost $506 million in the quarter, much worse than the $82 million loss last year. The weighted average of shares rose sharply to 90.0 million from 78.1 million.
The used car industry is an extraordinarily good one to be in. Prices have risen by 20% year over year. For some models that figure is close to 40%. Garcia said “Q1 was a unique environment. Omicron, high used vehicle prices, rapid changes in interest rates and other macro factors impacted Carvana and the used vehicle industry as a whole.” An incredible statement.
Garcia has been paid well for being the head of a battered company. Last year he made $5,050,345. That was 137 times the median compensation of his employees.
Garcia would need to go voluntarily or be pushed out by his father, who owns 84% of the company’s voting shares. Perhaps the father will see the light and make a change.
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