When leading financial analysts wonder whether a company’s stock value could soon reach zero, it’s a cause for concern, says Jim Ingle, representative of the District of Bermuda on Chesterfield’s board of supervisors. “But Carvana’s financial woes don’t appear to be affecting the Chesterfield facility.”
After a 97% precipitous fall in stock value, the national used-car dealer announced on Nov. 18 that it would begin laying off employees and closing locations. That leaves questions about the future of the company’s overhaul and inspection center on Woods Edge Road, which opened in late August. “Today, we are reducing the size of our team by approximately 1,500 employees, which represents approximately 8% of our business,” Carvana CEO Ernie Garcia wrote in an internal letter to employees obtained by the Chesterfield Observer. “These cuts are impacting many business and technology teams, as well as some operations teams where we are eliminating roles, locations or shifts to accommodate our size for the current environment.”
“The used-car dealer may not go out of business anytime soon,” reports The Motley Fool, a private financial and investment advisory firm based in Alexandria. “But investors are faced with the very real prospect that Carvana will significantly dilute its shares to raise cash to survive.” The company’s analysis concluded that buying Carvana stock was risky. “With rising debt and losses, there is a real possibility for the stock to go to zero.” (On Nov. 22, Daniel Gill, Carvana’s chief product officer, bought about $1 million worth of stock to temporarily stave off losses.) On Nov. 28, early trading showed Carvana’s stock dropped to about 7. $53 per share, drastically below its high for the year of $296.70.
As of press time, media representatives from the Tempe, Arizona-based company, famous for its giant gumball machine-like car dealership towers, declined to answer specific questions about the potential impact on Chesterfield, but said a clarifying statement from Carvana was forthcoming .
Jake Elder, senior project manager at Chesterfield Economic Development, says the district has been monitoring the company’s recent financial health. “It’s certainly something we follow and pay attention to [but] We have received no indication that anything has changed from the previously announced investment and job creation at this Chesterfield location.” He adds that the previously vacant property was recently valued at $22,629,300.
A $360,000 grant from the state’s deal-closing Commonwealth Development Opportunity Fund helped Chesterfield in its quest to divert the Carvana plant from competing communities in Ohio, North Carolina and Tennessee. The company enjoys a tax credit for each new full-time job created.
“They have given us no indication that this facility is in any way compromised,” reiterated Ingle, the Bermuda district supervisor. An initial skeptic of the project, he was elected weeks after the board of directors approved Carvana’s motion to rezon the property 4-1 in October 2020.
“There are several types of facilities that they have and as far as I know, this is not one of the endangered species,” he says. “But I can’t predict stocks, and if there’s speculation that their stocks could go to zero, that would be a problem. I don’t know how they would work at zero.”
The $25 million, 191,000 square foot Carvana center has been controversial. Neighbors from the Southcreek and Walthall Creek neighborhoods have expressed concern about the impact of additional vehicular traffic on the dual carriageway Woods Edge Road and industrial noise from trucks and car deliveries.
Earlier this year, Chesterfield sent the company a writ of foreclosure when it appeared it had breached the terms of the bid during construction of the facility. “They started driving cars with tractor trailers in and out,” says Ingle. “The citizens let me know what was going on and I checked it out and found they didn’t have all the terms offered for the operation.”
But the company seems keen to work with its neighbors, he adds. “After that, they seemed to clean up their act. Yes, it started out shaky and we had to put her feet up to the fire, but things seem to have leveled out. I haven’t had any complaints since they opened the shop.” (Erik Goulet, president of the Walthall Creek Homeowners Association, did not respond to requests for comment.)
To date, Elder says, Carvana’s reconditioning center has hired 263 employees to meet its announced goal of 400, and it continues its training efforts with the Chesterfield Technical Center, which is operated by county schools. “Carvana’s HR team has already worked with them to ensure there is an appropriate pipeline, not just for their business, but for other companies in the community that need certified auto technicians,” he says.
Overall, Carvana delivers on everything they promised, Ingle says. “I don’t know if people are thrilled to be there, but they’re not violating the agreement.”
Blaming higher interest rates and persistent inflation, analysts at The Motley Fool report that Carvana’s third-quarter sales fell 8% year over year and gross profit fell 31%. The company has just $316 million in cash (plus an additional $161 million in blocked cash) versus more than $6.6 billion in debt.
For now, Jake Elder is taking a wait-and-see attitude: “I’d rather not speculate on whether or not Carvana will be there because they are there at the moment.” ¦