A Carvana used car vending machine displays vehicles in Miami, December 9, 2022.
Joe Raedle | Getty Images
Actions of Carvana fell 14.2% on Wednesday following accusations from short sellers that the online retailer overstated its profits with the help of companies controlled by CEO Ernie Garcia III’s family.
Gotham City Research said Wednesday that the online used car retailer, which entered the market S&P500 last month, overstated its 2023-2024 earnings by more than $1 billion and is “much more dependent on related parties” linked to the family than previously reported.
Broadly, the company accuses Carvana’s profits of depending on DriveTime’s debt issuance, “toxic” loans and accounting irregularities.
Carvana, in an emailed statement, called the report “inaccurate and intentionally misleading.” The company said all of its “related party transactions are accurately disclosed in our financial statements.”
Carvana also reconfirmed plans to report 2025 results on Feb. 18, after Gotham claimed the company would have to delay its annual 10-K filing.
To support its claims, Gotham released the 2024 audited financial statements of DriveTime Automotive Group, Inc. and Bridgecrest Acceptance Corp. Both companies are owned by Ernest Garcia II, Carvana’s largest shareholder and the father of the online retailer’s CEO.
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CNBC has not independently verified the authenticity of the financial results, which Gotham said it obtained through the Freedom of Information Act.
The short seller report is the latest in a series of short sellers targeting Carvana in recent years.
Notably, dissolved short seller Hindenburg Research revealed a bet against Carvana last year, saying the online used car retailer’s turnaround was a “mirage” propped up by shaky lending and accounting manipulation.
Carvana shares have seen an unprecedented rise for the company since a bankruptcy scare near the end of 2022. The stock price rose from less than $5 per share during that period to close Tuesday at more than $477 per share.
Carvana stock closed Wednesday at $410.04, down 14.2%, marking the company’s second-worst trading day in the past year.