A Carvana used car “vending machine” on May 11, 2022 in Miami, Florida.
Joe Raedle | Getty Images
Shares of online used-car retailer Carvana surged on Thursday amid a wild trading session in which several heavily shorted stocks broke out.
The stock closed up 24.7%. Trading was halted at least four times on Thursday. Carvana’s share price had hit a new two-year low earlier in the session.
Stocks with high short interest are likely to appear in market rallies, as some investors who have bet against these companies are likely to cover their short positions by buying back borrowed stocks. This can lead to what is called a short squeeze.
Nearly 29% of Carvana shares available for trading are sold short, according to FactSet, among the highest ratios in US markets.
Earlier in Thursday’s session, major stock averages tried to rally after a sharp sell-off led by tech stocks.
Carvana’s surge comes as other names with big short bets against them popped up during the session. Shares of GameStop, AMC and electric vehicles traded sharply higher.
Carvana traded over 41 million shares today, against a 30-day average volume of around 9 million.
The company, whose shares have fallen more than 83% this year, has recently faced very negative sentiment on Wall Street. Carvana received downgrades from Stifel, Morgan Stanley and Wells Fargo in May.
“Deteriorating capital market conditions and worsening trends in the used vehicle industry have eroded our belief in Carvana’s path to securing the capital necessary to achieve sufficient scale and self-financing status. “Stifel’s Scott Devitt said in a research note on Tuesday.
Carvana announced disappointing quarterly results in April with a larger-than-expected loss per share.
Heavily shorted online used-car seller Carvana surges nearly 25%, is shut down multiple times
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