Heavily shorted online used car seller Carvana surges nearly 25%, is halted several times

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Heavily shorted online used car seller Carvana surges nearly 25%, is halted several times

A Carvana used car ‘vending machine’ on May 11, 2022 in Miami, Florida.

Joe Raedle | Getty Images

Shares of online used-car retailer Carvana rose Thursday amid a wild trading session that saw several heavily discounted stocks emerge.

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 by the start of the session.

Stocks with high short interest are likely to show up during market rallies as some investors who have bet against these companies are likely to cover their short positions by buying back borrowed shares. This can lead to a so-called short squeeze.

Almost 29% of Carvana’s available-for-trade shares are short, according to FactSet, among the highest rates in U.S. markets.

Early in Thursday’s session, the major stock moving averages attempted a comeback after a vicious sell-off led by technology stocks.

Carvana’s surge comes as other names emerged with big short bets against them during the session. Shares of GameStop, AMC and electric vehicles traded significantly higher.

Carvana traded over 41 million shares today, compared to a 30-day moving average volume of about 9 million.

The company, whose shares have fallen more than 83% this year, has faced some very negative sentiment on Wall Street of late. Carvana received downgrades from companies including Stifel, Morgan Stanley and Wells Fargo in May.

“Deteriorating capital market conditions and deteriorating trends in the used vehicle industry have shaken our belief in the path for Carvana to secure the necessary capital to achieve sufficient scale and self-funding status,” Stifel’s Scott Devitt said in a research note on Tuesday.

Carvana reported disappointing quarterly results in April, with a higher-than-expected loss per share.