Insiders Buying Carvana (CVNA) Stock in 2022 Are DEEP in the Red

It’s been a disastrous year for Carvana (NYSE:CVNA), as shares of the used-vehicle retailer are down by more than 95% year-to-date. Yesterday, CVNA stock plunged lower by more than 40% after it was announced that the company’s creditors had signed a pact that would allow them to act together when making negotiations with Carvana. The creditors, which include Apollo Global Management and Pacific Investment Management, hold around 70%, or $4 billion, of Carvana’s unsecured debt. The pact will be in effect for at least three months.

The pact was enacted in order to make the negotiation process more unified and to prevent creditor in-fighting. Meanwhile, Bloomberg reported that the company is currently in talks with lawyers and investment bankers to figure out how to manage its debt. Carvana has tapped Kirkland & Ellis and Moelis & Co to assist with this.

Following the news, Wedbush analyst Seth Basham lowered his price target to $1 from $9. In October, the analyst cut his price target to $15 from $50. “These developments indicate a higher likelihood of debt restructuring that could leave the equity worthless in a bankruptcy scenario, or highly diluted in a best case,” explained Basham.

CVNA Stock: Insiders Suffer Heavy Losses

Meanwhile, Carvana insiders who purchased shares this year are suffering massive losses. In the past 12 months, insiders have purchased 9.78 million shares and sold 129,581. That adds up to a net activity of 9.65 million shares purchased.

The purchases include a significant acquisition by CEO Ernest Garcia III. In April, Garcia reported purchasing 2 million shares at $80 per share as part of a common stock offering. His father, Ernest Garcia II, purchased 3.4 million shares as part of the same offering. At the current price of $4.50, the father and son duo have lost 94% on their April purchases. Garcia II also reported purchasing 1.98 million shares at average prices between $20.49 and $21.94 in June.

President, Special Projects Thomas Taira appears to be the insider that purchased shares at the lowest price this year. On Nov. 22, Taira purchased 35,000 shares at an average price of $6.86.

It isn’t just insiders who are suffering. Last month, Morgan Stanley purchased 7.8 million shares, increasing its existing position by 147%.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

More from InvestorPlace