Market Extra: Carvana stock tumbles 43%, books worst day on record as bankruptcy fears rev up

Carvana’s shares are down over 98% thus far in 2022, FactSet data show.

In the most recent development, Carvana creditors, led by Apollo Global Management Inc.
APO,
-2.93%
 and Pacific Investment Management Co., signed an agreement to team up in credit talks with the company in a move to avert the conflicts that have arisen in other debt restructurings, Bloomberg reported Wednesday. That suggests that a restructuring of the company might be imminent.

The company did not respond to an email requesting comment.

Bank of America analyst Nat Schindler last month downgraded the company’s stock — one of a number of recent downgrades — to neutral from buy, noting that it has been burning through cash.

“We now believe that without a cash infusion, Carvana is likely to run out of cash by the end of 2023,” Schindler wrote at the time.

The decline for Carvana comes as the Dow Jones Industrial Average
DJIA,
+0.00%,
the S&P 500
SPX,
-0.19%
and the Nasdaq
COMP,
-0.51%
also finished lower in Wednesday trade. The share slide occurs amid heightened worries that the U.S. economy is headed for a recession next year, as the Federal Reserve attempts to quell inflationary pressures brought on at least in part by the COVID-19 pandemic.

Carvana, which was created to disrupt the used-car sales market, was one of the companies whose shares experienced a tailwind during the pandemic, as buyers flocked to used cars as a result of disruptions in the supply chain for new cars.

However, a surge in interest rates and a push for rapid growth fueled by debt proved a recipe for disaster for Carvana’s stock.

Shares of competitor AutoNation
AN,
-0.54%
closed down marginally on Wednesday and have risen 2.1% so far this year.