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Carvana Stock Plunges on Family Ties Allegations

29 Jan

Summary

Carvana shares dropped 14.2% on Wednesday.
Short seller claims $1 billion earnings overstatement.
Allegations involve businesses linked to CEO's family.

Carvana Stock Plunges on Family Ties Allegations

Shares of Carvana experienced a sharp decline of 14.2% on Wednesday amid allegations from short-seller Gotham City Research. The research firm claims the online used car retailer, recently added to the S&P 500, has overstated its earnings for the 2023-2024 period by more than $1 billion.

Gotham City Research further alleges that Carvana's financial health is significantly dependent on businesses controlled by the family of its CEO, Ernie Garcia III. This claim is supported by financial data from DriveTime Automotive Group and Bridgecrest Acceptance Corp., both owned by Ernest Garcia II, the CEO's father and Carvana's largest shareholder. These financials were reportedly obtained via the Freedom of Information Act, though CNBC has not independently verified their authenticity.

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