Carvana up fractionally as short-seller Kerrisdale calls stock ‘worthless’

Shares of Carvana retreated in pre-market trading after Kerrisdale Capital published a report regarding its short thesis on the stock, but the shares are fractionally higher in early trading following the report’s publication. In the report published on its site, the firm says in part: “We are short shares of Carvana Co. (CVNA), a $4B market cap online platform for buying and selling used cars. Originally hyped up as an innovative disruptor, Carvana is now recognized to be just a poorly run auto retailer struggling under the challenges of a severe industry downturn and the unsustainable burden of $6.5B in debt.” Shares have risen 165% in only a month on “misguided optimism for profits that amount to little more than buffing the paint job on a totaled car,” contends the firm, which adds that “Carvana shares are worthless.” Kerrisdale concludes its report by stating: “Carvana should be valued like any other publicly traded auto retailer, and specifically one that is poorly capitalized and more cyclical due to a lack of diversification and subprime exposure. We view the equity as a zero and investing at current levels is a worse deal than buying a clunker from a slick used car salesman.”