Despite the S&P 500 (SPY) gaining 18.2% YTD, the market bubble is alive and well, and thriving.
On the brink of bankruptcy, used automotive firm Carvana (CVNA) rose from a year low of $3.55 to over $40. It posted Q2 revenue falling by 23.5% Y/Y to $2.97 billion. Although it expects to post positive adjusted EBITDA, those adjustments exclude interest payments on debt. Furthermore, the 35 million stock sale will dilute investors.
Carvana’s debt deal worth up to $4.3 billion distresses the firm’s balance sheet. Holders get less than promised once the deal closes. Markets are ignoring the bond rating of D on Carvana’s debt. Beware of holding CVNA stock.
Sirius XM Holdings (SIRI) rose from sub-$4.00 to nearly $8.00. Short-sellers have a 33.7% short interest against the streaming services firm. The exchange halted trade on the 35% one-day rally, undermining short-sellers.
AMC Entertainment (AMC) doubled its stock price after the market close last Friday. The courts rejected APE preferred equity units from a share conversion. This damages AMC’s capital raise requirements. Without the capital, AMC will eventually restructure its business.
Shareholders, who fought the deal, will ironically lose everything.
Bears will far well from all three stocks but beware of the sudden rallies.
