Carvana approves shareholder rights plan to protect future tax bill reduction According to Reuters

© Reuters. The Carvana logo seen in this illustration was taken June 27, 2022. REUTERS/Dado Ruvic/Illustration

(Reuters) – carvana Co (NYSE:) said it had applied a “poison pill” to limit shareholders from increasing shares, which would make it difficult for the used car retailer to use its net operating loss (NOL). ) brought to reduce tax.

Shares of the company rose 11% at $7.70 on Tuesday as Ally Bank and its Carvana unit Ally Financial (NYSE:) agreed to buy up to $4 billion in auto loans from sellers. auto retailer, giving Carvana a new source of funding as it tries to restructure its operations.

Carvana said it has “substantial” US federal NOLs that may be available to offset future taxable income.

Companies with large NOLs often use poisons to help them cut their tax bills. Poisons are also used to prevent hostile takeovers.

Carvana said the company’s ability to use NOL would be significantly limited if the company’s 5% shareholders increase their ownership.

Carvana, which analysts say is struggling financially after expanding rapidly during the pandemic, has set a trigger level of 4.9% for the shareholder rights plan to take effect.

The rights plan went into effect on Monday and is expected to remain in effect until January 15, 2026.

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