Carvana's Massive Success Is a 'Mirage:' Report

Hindenburg Research says the company's sharp turnaround since 2022 isn't all it's cracked up to be.

Carvana

Photo by: Carvana

Christopher Smith

By: Christopher Smith

Jan 3, 2025 at 1:30pm ET

Add Motor1.com as a preferred source in Google

Comment

Two years ago, it appeared Carvana's future was full of empty used-car vending machines. The online auto retailer's stock was near worthless, fueled by massive financial losses and legal problems related to vehicle titles in numerous states. With billions of dollars in debt, bankruptcy seemed inevitable. But in November 2024, a restructured Carvana reported a net income of $148 million. And now stocks are selling at approximately $191 per share.

Some might call Carvana's two-year turnaround a miraculous turn of events. However, a recent report from Hindenburg Research calls it a "mirage" driven by questionable accounting practices and sketchy partnerships. Before going further, it's important to note that Hindenburg Research is an investment research firm and a noted short seller. In its report, the firm states it has "taken a short position in shares of Carvana Co. (NYSE:CVNA)."

Carvana Delivery Truck

Photo by: Carvana

The very extensive report claims Carvana's numbers don't add up when compared to current market conditions. The company's activity in the subprime loan segment is mentioned extensively, with an alleged former Carvana director telling Hindenburg Research that the company approved 100 percent of applicants. With delinquencies rising, the report alleges that bad loans are given generous extensions so Carvana doesn't have to report them.

The situation is further muddled by Carvana's loan servicer, which is reportedly an affiliate of DriveTime, a used car company run by Ernie Garcia II—the father of Carvana's CEO. This same individual, according to the report, dumped billions worth of Carvana stock before the big collapse in 2022. He also pled guilty to bank fraud in 1990.

Speaking of DriveTime, the report alleges Carvana engages in iffy car dealings with the company, including "sham" deals cited in a 2024 class-action lawsuit. Unreported costs of extended warranties are also associated with DriveTime, along with a litany of other financial tapdancing. Carvana is also apparently the subject of an SEC investigation, though details of it aren't mentioned.

What do you think?

View

Comments

The takeaway from all this, per Hindenburg Research, is that Carvana is padding the numbers to create a windfall for its CEO, Ernie Garcia III, and his father.

Carvana didn't respond to our request for comment. CNBC cites a Carvana spokesperson as saying the arguments in the report "are intentionally misleading and inaccurate and have already been made numerous times by other short sellers seeking to benefit from a decline in our stock price."

Carvana In 2022:

Carvana Lays Off 2,500 Workers, Buys Auction House For $2.2 Billion

Carvana Faces Title And Registration Issues Again, This Time In PA

Get the best news, reviews, columns, and more delivered straight to your inbox, daily.

back

Subscribe For more info, read our Privacy Policy & Terms of Use.

Source: Hindenburg Research

We want your opinion!

What would you like to see on Motor1.com?

Take our 3 minute survey.

- The Motor1.com Team

Share this Story

GO TO COMMENTS

(

)

Got a tip for us? Email: tips@motor1.com

View all comments ( )

Popular

Bugatti Restores One-Off Veyron With A Mirror-Like Aluminum Body

BMW Kept This Hatchback A Secret For Decades

Skoda Wants You To 3D Print Pieces Of Your Car At Home

The Gas BMW M3 Isn't Dead: Next-Gen Prototype Roars