$CVNA Needs More Investor Cash For Adesa Buyout

Deep-Junk-Rated Carvana Gets $4.5 Billion from New Investors, after Shares Collapsed by 79%, Hoping the World Hasn’t Run out of Greater Fools Yet
by Wolf Richter • Apr 25, 2022 • 77 Comments


Carvana, which sells used cars online, is rated deep-junk, and has been losing a ton of money every year, even in the hottest used-car market ever, and whose shares collapsed by 79% from the peak in August last year, now needs to extract more cash from investors to fuel its cash-burn machine and to pay for the $2.2 billion acquisition of Adesa.

Adesa runs wholesale auto auctions and provides related services through brick-and-mortar venues around the US and Canada. Its customers include the biggest used-car dealers that buy and sell at these auctions, and automakers that sell their rental program cars at these auctions.

The fact that a large used-car dealer buys an auto auction house that caters to other used-car dealers and automakers is a problem. Those other used-car dealers compete with Carvana, and they can buy their cars at other auctions. And the automakers can sell their program cars at other auctions. And now there are already rumors that they’re thinking about severing their relationship with Adesa following the purchase by Carvana. This would be a new nightmare for Carvana, after spending $2.2 billion on that deal.