- Carvana is letting go of about 1,500 people, or 8% of its staff, on Friday.
- After hitting an all-time high of $376.83 per share on August 10, 2021, Carvana’s stock has dropped by about 97% this year.
- Carvana stock ended trading on Friday at $8.06 per share, which is 3.1% less than where it started.
Carvana is letting go of about 1,500 people, or 8% of its staff, on Friday. This is because the company’s stock has dropped sharply this year, the market for used cars is getting worse, and there are worries about the company’s long-term direction.
The CEO of Carvana, Ernie Garcia, sent an email with the subject line “Today is a hard day.” In it, he talks about economic problems like higher financing costs and delays in buying cars. He says that the company “failed to accurately predict how this would all turn out and what effect it would have on our business.”
“Today is not a good day. The world has continued to get harder, and in order to do what’s best for the business, we have to make some hard decisions,” Garcia wrote in an email to employees on Friday.
As interest rates rise, inflation stays high, and fears of an economic downturn grow, more and more tech-related jobs are being cut. For Carvana, it comes after rapid growth and some mistakes made during the coronavirus pandemic to better take advantage of a market for used cars that is stronger than ever before.
Carvana stock ended trading on Friday at $8.06 per share, which is 3.1% less than where it started. After hitting an all-time high of $376.83 per share on August 10, 2021, Carvana’s stock has dropped by about 97% this year.
A Carvana spokeswoman confirmed that the letter was real, but she didn’t want to say anything else.
The layoffs mostly affect employees in Carvana’s corporate and tech departments, as well as some operational positions, where the company is “eliminating roles, locations, or shifts to match our size with the current environment,” according to a letter.
Garcia said that the affected workers will get severance pay, health care coverage for an extra three months, and other benefits.
“I’m sorry to those who were hurt,” Garcia said. “As you all know, we made a decision in May that was a lot like this one. You have a right to ask why this keeps happening, but I’m not sure I can give you a clear answer.
Carvana grew by leaps and bounds during the pandemic, when people started buying things online instead of going to a dealership because Carvana promised to make selling and buying used cars easy at a customer’s home.
But Carvana didn’t have enough cars or enough places and people to work on the cars it did have in stock to meet the surge in customer demand. That’s why Carvana bought ADESA and a record number of cars at sky-high prices when demand was slowing because of rising interest rates and fears of a recession.
Two weeks ago, the company’s stock dropped because its top and bottom lines for the third quarter didn’t meet Wall Street’s expectations. Now, the company is letting people go. Compared to the same time last year, Carvana’s revenue, profit, and sales all went down.
After seeing the results, Morgan Stanley took away its rating and price target for the stock. Analyst Adam Jonas said that the change was because the market for used cars was getting worse, the company had a lot of debt, and the funding market was unstable.
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