Two years in the past, it appeared Carvana’s future was stuffed with empty used-car merchandising machines. The net auto retailer’s inventory was close to nugatory, fueled by huge monetary losses and authorized issues associated to automobile titles in quite a few states. With billions of {dollars} in debt, chapter appeared inevitable. However in November 2024, a restructured Carvana reported a internet earnings of $148 million. And now shares are promoting at roughly $191 per share.
Some would possibly name Carvana’s two-year turnaround a miraculous flip of occasions. Nonetheless, a current report from Hindenburg Analysis calls it a “mirage” pushed by questionable accounting practices and sketchy partnerships. Earlier than going additional, it is necessary to notice that Hindenburg Analysis is an funding analysis agency and a famous brief vendor. In its report, the agency states it has “taken a brief place in shares of Carvana Co. (NYSE:CVNA).”
Picture by: Carvana
The very in depth report claims Carvana’s numbers do not add up when in comparison with present market circumstances. The corporate’s exercise within the subprime mortgage section is talked about extensively, with an alleged former Carvana director telling Hindenburg Analysis that the corporate accredited 100% of candidates. With delinquencies rising, the report alleges that dangerous loans are given beneficiant extensions so Carvana does not should report them.
The scenario is additional muddled by Carvana’s mortgage servicer, which is reportedly an affiliate of DriveTime, a used automobile firm run by Ernie Garcia II—the daddy of Carvana’s CEO. This identical particular person, in keeping with the report, dumped billions price of Carvana inventory earlier than the massive collapse in 2022. He additionally pled responsible to financial institution fraud in 1990.
Talking of DriveTime, the report alleges Carvana engages in iffy automobile dealings with the corporate, together with “sham” offers cited in a 2024 class-action lawsuit. Unreported prices of prolonged warranties are additionally related to DriveTime, together with a litany of different monetary tapdancing. Carvana can be apparently the topic of an SEC investigation, although particulars of it aren’t talked about.
The takeaway from all this, per Hindenburg Analysis, is that Carvana is padding the numbers to create a windfall for its CEO, Ernie Garcia III, and his father.
Carvana did not reply to our request for remark. CNBC cites a Carvana spokesperson as saying the arguments within the report “are deliberately deceptive and inaccurate and have already been made quite a few occasions by different brief sellers looking for to profit from a decline in our inventory value.”
