A tough summer for wholesale automobile marketplace operator ACV Auctions (ACVA 1.39%) stretched out into the first full week of September. According to data compiled by S&P Global Market Intelligence, the company's stock price took a sub-15% tumble over that stretch. Lingering downbeat sentiment on the company was exacerbated by news of a client's bankruptcy filing.
Client bankruptcy blues
Before market open Wednesday, ACV divulged in a regulatory document that an unnamed customer of its ACV Capital subsidiary had filed for chapter 7 bankruptcy (in which a company, overburdened by debt, sells off assets to reduce the load). ACV Capital had provided a line of credit to this client, who was unnamed. The outstanding amount of the credit line was roughly $18 million, the company said.
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ACV said these borrowings are secured by vehicles. However, it added, it will continue "to assess the status and valuation of the collateral and any necessary provision for doubtful receivables relating to these loans."
Given this status, ACV wrote that it expects to book a loss from the situation. At the moment, it cannot accurately determine the amount of the shortfall. It said that it intends to use all means at its disposal to "protect its interests."
NYSE: ACVA
Key Data Points
Second-quarter shocker
The timing of the disclosure wasn't ideal, as it came less than one month after ACV published dispiriting second-quarter results. The company posted a surprise net loss for the period, and missed the average analyst estimate for revenue. Its third-quarter top-line guidance also fell short of the prognosticator consensus.
