A lot has happened since my last Carvana update in Carvana: Feedback Loops. Let’s run through it.

On July 18th, Carvana announced it was moving up its second-quarter earnings release date from August 3rd to the following morning. I thought this unusual move had to be driven by some sort of imminent capital raise and/or debt restructuring announcement.

The following morning the company announced its second-quarter results in conjunction with, sure enough, the launch of a debt exchange offer with the support of over 90% of its noteholders.

Second-quarter adjusted EBITDA increased from “positive” previously to “above $50 million” while non-GAAP GPU went from “above $5,000” to “above $6,000.” The “majority” of the non-GAAP GPU improvement is the result of selling down a large chunk of the elevated backlog of loans during the quarter. The “majority” language that Ernie used at the conference seemed to imply a minority of the improvement was attributable to something else, likely better retail GPU as a result of falling average days to sale.

Carvana reported its first-quarter results on May 4th. For context, the company had previously provided very encouraging preliminary first-quarter results in late March that the market seemed to oddly underreact to, which I wrote about in Carvana: The Disconnect. Interestingly, Carvana’s actual first-quarter results came in at or above the high end of the previously announced preliminary results. CVNA closed up 24% the day after earnings and is currently trading about 108% higher than its pre-earnings close.

Last week, Carvana announced an exchange offer to its existing noteholders. I’ll get to the details in a bit, but probably more interesting was management’s release of preliminary first-quarter results in conjunction with the offer.

Preliminary first-quarter results, specifically regarding SG&A and adjusted EBITDA, meaningfully exceeded expectations. This was roughly consistent with the thesis I outlined in Carvana: Groupthink, although first-quarter adjusted EBITDA will beat my prior estimate as well.

I was about to write that Carvana is a super controversial stock, but that implies it’s hotly debated among the bulls and bears. I don’t really see that. Most seem to assume Carvana is going to declare bankruptcy shortly and any bulls that remain are in hiding. When sentiment gets that one-sided, I think it’s worth taking a close look while trying to be objective. Because if sentiment happens to be plagued by groupthink, flawed analysis, or little analysis at all, and things end up ok, that’s how career-defining investments are possible. Or sentiment could turn out absolutely correct, even if a lot of it hasn’t been thoughtfully considered, leading to a total loss. Interested? Read on.