Short sellers of Carvana Co. (NYSE: CVNA) have experienced a major setback, surpassing a staggering $1 billion in losses this year alone.
Carvana, a struggling used-car dealer, has been on a hot streak, with its stock rallying 411% in 2023. Unfortunately for bearish investors, this remarkable surge has resulted in mark-to-market losses of $1.04 billion for shorts. These losses account for approximately 56% of the company’s free float, according to data from S3 Partners.
Ihor Dusaniwsky, S3’s head of predictive analytics, commented on the situation, stating, “Shorting Carvana has not been a profitable trade this year, and today’s price move has made it an even worse trade.” Prior to the recent rally, shorts were already down about $600 million in mark-to-market losses for the year.
The day’s trading volume was exceptionally high, exceeding the three-month daily average by over 10 times, according to Bloomberg’s data. However, Dusaniwsky clarified that only a portion of the increased volume “can be attributed to short covering due to a painful short squeeze.”
The majority of the trading activity came from long investors purchasing Carvana shares, he added.
On Thursday, Carvana’s stock experienced a remarkable 56% surge, propelling it to a closing price of $24.23. This surge was fueled by the company’s announcement of improved operations in the second quarter. Despite this remarkable surge, the stock remains significantly below its all-time high of $370.10 reached in August 2021.
Zabih Ullah is a seasoned finance writer with more than ten years of experience. He is highly skilled at analyzing market trends, decoding economic data, and providing insightful commentary on various financial topics. Driven by his curiosity, Zabih stays updated with the latest developments in the finance industry, ensuring that his readers receive timely and relevant news and analysis.
