Carvana accounting tricks can only last for so long!
Hi HODLers, Hiveans and Lions,
I have recently been feeling very frustrated with companies resorting to financial tricks to create the illusion of better financial health than they actually possess.
Such tactics not only mislead investors and stakeholders but also erode trust in the corporate world. One such example is Carvana's use of a debt extinguishment accounting trick to portray a positive net income of $741 million. This type of financial maneuvering raises serious concerns about the transparency and ethics of a company's financial reporting.
This is a classic example of how companies can manipulate their financial statements. In this case, they might have selectively recognized a gain related to the extinguishment of debt, which temporarily inflates their reported net income.
While this practice may be technically legal, it can be highly misleading because it does not reflect the company's true operating performance.
As we can see, the Adjusted EBITDA is going down despite a higher number of cars sold. As I will highlight below, Used Car prices have continuously trending down and there is no relief in sight.
This company is consistently losing money depiste selling a lot of its inventory, not paying debt because it refinanced with PIK instruments where they will pay a higher interest rate later on.
Q4 Guidance is pretty weak...
• A sequential decline in retail units sold, driven primarily by industry and seasonal patterns,
• Non-GAAP Total GPU above $5,0001
for the third consecutive quarter, and
• Positive Adjusted EBITDA1 for the third consecutive quarter.
Conclusion: Despite the recent shortsqueeze, it seems like the downtrend will continue until Q4 where I expect the company tor un out of shenanigans to hide its poor performance.
I wouldn't be surprised if we even have a capital increase diluting shareholders in the near future as the company will not manage to raise cash in the debt market in its current shape.
Stay safe out there,
Posted Using InLeo Alpha