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.
The company broadly accuses Carvana of relying on DriveTime’s bond issuance, “toxic” loans, and accounting fraud for Carvana’s profits.
In an emailed statement, Carvana criticized the report as “inaccurate and intentionally misleading.” “All related party transactions are accurately disclosed in the financial statements,” the company said.
Carvana also reaffirmed its plans to release its 2025 financial results on February 18, after Gotham claimed it needed to delay 10,000 annual filings.
To support its claims, Gotham released the 2024 audited financial reports of DriveTime Automotive Group, Inc. and Bridgecrest Acceptance, Inc. Both companies are owned by Carvana’s largest shareholder, Ernesto Garcia II, the online retailer’s chief executive officer’s father.
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CNBC did not independently verify the reliability of Gotham’s financial results, which it said it obtained under the Freedom of Information Act.
The short-selling report is the latest in a series of short-selling incidents targeting Carvana in recent years.
Notably, the now-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.
