Notorious short seller Hindenburg Research has targeted online used car retailer Carvana (CVNA), calling the company’s turnaround strategy a “mirage.”
The report by Hindenburg Research, which has shorted Carvana stock, claims the company is engaged in accounting manipulation.
Titled “Carvana: A Father-Son Accounting Grift For The Ages,” the report focuses on the practice of loan sales as well as the business relationship between CEO Ernie Garcia III and his father, Ernest Garcia II, who is Carvana’s largest shareholder.
The critical report comes after Carvana’s stock rose nearly 400% in 2023 as the company improved its financial results and reduced costs as part of a turnaround plan.
In a written statement, Carvana called Hindenburg’s report “intentionally misleading and inaccurate” without going into details.
For its part, Hindenburg says it uncovered $800 million U.S. in loan sales as well as “accounting manipulation and lax underwriting…”
Hindenburg also claims that insiders at Carvana have sold “billions in stock” in recent months.
Hindenburg also alleges that Carvana is “avoiding reporting higher delinquencies by granting loan extensions instead.”
This is not the first time that the Garcia family and its control of Carvana have been a target of investors.
Some investors have filed lawsuits against the Garcia family, claiming they operate a “pump-and-dump” scheme with the stock to enrich themselves.
Carvana went public in 2017 after spinning off from DriveTime, a bankrupt rental-car business known as Ugly Duckling that Garcia II grew into a dealership network.
Garcia II previously pled guilty to bank fraud back in 1990.
The stock of Carvana declined 2% on news of the short report from Hindenburg Research and is currently trading at $199.56 U.S. per share.
