Carvana (CVNA) stock spiked as much as 27% in pre-market trading on Wednesday after the online care retailer announced a deal to restructure its debt and adjusted profits that beat analyst expectations before the opening bell.
The company's debt restructuring plan will reduce its outstanding debt by over $1.2 billion by exchanging existing unsecured debt with new notes which will carry an interest expense that is $430 million lower per year over the next two year. The company may also sell up to $350 million in new stock as part of this restructuring.
"This transaction significantly increases our financial flexibility by reducing our total debt, extending maturities, and lowering near-term cash interest expense as we continue to execute our plan of driving significant profitability and returning to growth," Carvana CFO Mark Jenkins said in a statement.
The company also announced quarterly results, posting vehicle unit sales that missed estimates while revenues and profits topped expectations.
Carvana sold 76,530 cars during the quarter, fewer than the 76,937 expected by analysts.
The company reported revenue in the quarter of $2.96 billion, more than the $2.55 billion expected by the Street, while adjusted EBITDA totaled $155 million, almost triple the $57.5 million expected by analysts.
"Our strong execution has made the business fundamentally better, and combined with today’s agreement with noteholders that reduces our cash interest expense and total debt outstanding, gives us great confidence that we are on the right path to complete our three-step plan and return to growth," founder and CEO Ernie Garcia said in a release.
Carvana shares have been one of the biggest winners in the stock market this year, rising more than 700% after a more than 98% drop from its peak in the summer of 2021. The stock is still more than 85% below its record closing high of $370.10 reached in August 2021.
The stock's massive rallies have been reminiscent of the pandemic-era "meme craze." When the stock goes up, shares are buoyed by short sellers who bet the price would move to the downside.
Short interest in Carvana currently sits at more than 50% of the outstanding float, an enormously high level, according to recent data analytics firm S3 Partners.
Vehicles are displayed at a Carvana dealership, which allows customers to buy a used car online and have it delivered or pick it up from an automated-tower, in Austin, Texas, U.S.. REUTERS/Brian SnyderJPMorgan analysts recently downgraded the stock to Underweight citing a "valuation [that] has once again disconnected materially from fundamentals."
The company, once a pandemic darling, laid off workers last year in an effort to cut costs and preserve cash. Shares reached a 52-week low of $3.55 on December 2022 amid speculation of a bankruptcy.
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre
For the latest earnings reports and analysis, earnings whispers and expectations, and company earnings news, click here
Read the latest financial and business news from Yahoo FinanceClick Here To Get Funded!