Carvana jumps 30% to boost 2023 earnings amid meme-style short squeeze

  • Carvana shares rose 30% on Monday as the retailer extends its 2023 rally.
  • The company has the second-highest short rate at 59%, according to MarketWatch.
  • Traders are betting that the firm’s rally will not last due to looming bankruptcy fears.

Carvana shares rose 30% on Monday as the online used car dealer extends its massive 2023 rally.

Shares are up 108% last month after falling 94% last year due to rising inflation and falling used car prices. Shares closed at $10.08 on Monday.

Short sellers are betting that the firm’s rally won’t last long as it faces a host of financial problems, including looming bankruptcy fears. In addition, Carvana shares are likely to be sensitive to the Fed’s rate hike announcement later this week.

According to MarketWatch, the Arizona-based company holds the second-highest share of short positions at 59%, meaning that more than half of the outstanding shares are in the hands of short sellers betting on the stock’s fall.

Meanwhile, Carvana is resorting to a “poison pill” strategy to thwart hostile takeover attempts before the company can resolve its financial problems.

But Carvana’s rally is reminiscent of the meme stock craze in 2021, when GameStop jumped 134% as a result of a concerted effort by retail traders on Reddit to boost the video game retailer’s share price.

This has created what is known as a short squeeze, in which retail traders target stocks with high short interest. Their coordinated buying pushes the stock higher, forcing short sellers to cover their positions by buying the stock they are betting against, fueling the rally.

Content Source

News Press Ohio – Latest News:
Columbus Local News || Cleveland Local News || Ohio State News || National News || Money and Economy News || Entertainment News || Tech News || Environment News

Related Articles

Back to top button