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.
