Carvana used car vending machine displaying vehicles in Miami, December 9, 2022.
Joe Radle | Getty Images
shares of Carvana The company plunged 14.2% on Wednesday after short sellers accused the online second-hand retailer of inflating its profits with the help of a business controlled by CEO Ernie Garcia III’s family.
Gotham City Research reported Wednesday that the online used car retailer S&P500 Last month, the company overstated its 2023-2024 revenue by more than $1 billion, saying it was “much more dependent on related parties” related to the family than previously disclosed.
To make their case, short sellers released the 2024 audited financial reports of DriveTime Automotive Group Inc. and Bridgecrest Acceptance Inc. Both companies are owned by Ernesto Garcia II, Carvana’s largest shareholder and the father of the online retailer’s chief executive officer.
CNBC did not independently verify the reliability of Gotham’s financial results obtained under the Freedom of Information Act.
carbana strain
The company broadly accuses Carvana of relying on DriveTime’s bond issuance, “toxic” financing and accounting, and accounting fraud for Carvana’s profits.
Carvana did not immediately respond to a request for comment on Gotham City Research’s report. The report is the latest in a spate of short-selling activity targeting the company in recent years.
Dissolved short seller Hindenburg Research disclosed its bet on Carvana last year, claiming the online used car retailer’s turnaround was a “mirage” fueled by shaky financing and accounting manipulation.
Carvana’s stock price has been on an unprecedented rise for the company since its bankruptcy scare around late 2022. The stock has soared from less than $5 per share in that time to more than $477 per share at Tuesday’s close.
Carvana stock closed 14.2% lower at $410.04 on Wednesday, marking the company’s second-worst trading day in the past year.
