Carvana adopts shareholder rights plan to preserve availability of NOLs

Carvana announced earlier today that its board of directors adopted a shareholder rights plan designed to protect long-term shareholder value by preserving the availability of Carvana’s net operating loss carryforwards, or "NOLs," and other tax attributes under the Internal Revenue Code. "Carvana has significant U.S. federal NOLs that could be available to offset its future federal taxable income. Carvana’s ability to use these NOLs would be substantially limited if its ‘5-percent shareholders’ increased their ownership of the value of such company’s stock by more than 50 percentage points over a rolling three-year period, which the IRC classifies for purposes of NOL availability as an ‘ownership change.’ The Tax Asset Preservation Plan is intended to reduce the likelihood of such an IRC Section 382 ‘ownership change’ at Carvana by deterring any person or group from acquiring beneficial ownership of 4.9% or more of Carvana’s outstanding Class A common stock. Carvana believes that the adoption of the Tax Asset Preservation Plan is in the best interest of the company, given the potential value that the significant NOLs represent. The Tax Asset Preservation Plan is similar to those adopted by numerous other public companies with significant NOLs. The Tax Asset Preservation Plan is not designed to prevent any action that the Board determines to be in the best interest of Carvana, and will help to ensure that the Board of Directors remains in the best position to discharge its fiduciary duties," the company stated. The Tax Asset Preservation Plan took effect on January 16, 2023 and is scheduled to continue in effect until January 15, 2026, unless terminated earlier in accordance with its terms.