Carvana Overextends and Lays Off 2,500 People
Posted on 05/11/2022
Online car dealer Carvana Co. has laid off 2,500 employees, or about 12% of the company’s workforce. Earlier, Carvana finalized its acquisition of car auction company Audesa U.S. for $2.2 billion, which operates 56 auction locations across the U.S. Carvana was a favored company during the COVID-19 pandemic and had a meteoric rise. Carvana is based in Tempe, Arizona and is known for its multi-story car vending machines.
Westport, Connecticut-based CAS Investment Partners, a hedge fund managed by Clifford Sosin (age 40), lost 43% this year according to an investor letter. CAS Investment Partners makes concentrated bets on roughly 8 stocks and had bet a quarter of its capital in Carvana at the end of March 2022. Carvana extended its market cap decline in 2022 and so far experienced a 75% drop in share price. Carvana had to do a junk bond offering and ended up having Apollo Global Management Inc. buying around half of the bond sale.
“Carvana’s challenges, especially when coupled with the precipitous decline in its stock price, clearly seem terrifying,” Sosin wrote in the investor letter. However, “I believe that in due time we will look back at them as bumps in the road on the company’s path to success.”
CAS Investment Partners oversees roughly US$2.2 billion, including leverage, according to regulatory filings.