8-KMaterial AgreementsShareholder MattersCorporate Changes+2

CARVANA CO. 8-K Report, Material Agreement (Jan 17, 2023)

Filed January 17, 2023For Securities:CVNA

Summary

Carvana Co. (CVNA) has implemented a Tax Asset Preservation Plan through the declaration of a dividend of one preferred share purchase right (a "Right") for each outstanding share of Class A Common Stock. This plan, effective January 15, 2023, is designed to protect the company's Net Operating Losses (NOLs) and other tax attributes from being significantly limited due to an "ownership change" as defined by Section 382 of the Internal Revenue Code. The Rights will detach and become exercisable under specific triggering conditions, primarily if any person or group acquires beneficial ownership of 4.9% or more of the company's common stock, or initiates a tender offer that would result in such ownership. The plan aims to deter such acquisitions and preserve the value of Carvana's tax assets for future use against taxable income. The Rights have a purchase price of $50.00 per one-thousandth of a share of Series B Preferred Stock and an expiration date of January 15, 2026, unless redeemed earlier by the Board of Directors.

Key Highlights

  • 1Carvana has adopted a Tax Asset Preservation Plan to protect its Net Operating Losses (NOLs) and other tax attributes.
  • 2A dividend of preferred share purchase rights (Rights) has been declared for each outstanding Class A Common Share.
  • 3The plan aims to prevent an 'ownership change' under Section 382 of the Internal Revenue Code, which could severely limit the use of NOLs.
  • 4The Rights will be triggered if a person or group acquires 4.9% or more of Carvana's common stock, or commences a tender offer leading to such ownership.
  • 5The Rights entitle holders to purchase Series B Preferred Stock at a specified price, designed to be dilutive to an acquirer.
  • 6The plan is intended to deter hostile takeovers or significant stake acquisitions that could jeopardize tax asset utilization.
  • 7The Rights will expire on January 15, 2026, unless redeemed earlier by the Board of Directors.

Frequently Asked Questions

The primary purpose is to preserve Carvana's Net Operating Losses (NOLs) and other tax attributes. These attributes can be used to offset future taxable income, and an "ownership change" under Section 382 of the Internal Revenue Code could significantly limit their usability.

Carvana is distributing preferred share purchase rights (Rights) to its common stockholders. These Rights will allow holders to purchase a fraction of a share of Series B Preferred Stock at a set price if a triggering event occurs. The plan is designed to make it prohibitively expensive for any single entity or group to acquire a significant stake (4.9% or more) in Carvana without negotiating with the Board.

A triggering event occurs if a person or group acquires beneficial ownership of 4.9% or more of Carvana's outstanding common stock, or if a tender offer is made that would result in such ownership. The Rights will then separate from the common stock and become exercisable.

Yes, the Board of Directors has broad discretion. They can redeem the Rights at a nominal price ($0.001 per Right) under certain conditions, or amend the terms of the Rights. They can also exempt specific persons or transactions from the plan's provisions before a triggering event occurs.