Report, called “Karwana: A Father-Son’s Reckoning for the Ages.”“Caruana’s debt sale process, as well as the business relationship between CEO Ernie Garcia III and his father, Ernest Garcia II, who is Caruana’s largest shareholder, are at stake.
Shares of Carvana closed Thursday at $199.56, down 1.9% — its first close below $200 a share since October. The stock rose nearly 400% in 2023, as the company improved results and cut costs as part of a turnaround plan. Led by Ernie Garcia III.
In a statement, Caruana called the Hindenburg report “deliberately misleading and inaccurate” without going into specific details.
“In the 7 years since our IPO, Carvana has been one of the most researched public companies. The arguments in today’s report are intentionally misleading and false and have already been repeated many times by other short sellers. have been made to take advantage of the decline in our company’s stock price,” Caruana said in an emailed statement Thursday afternoon. “We intend to remain focused on executing our plan for another great year in 2025.”
Hindenburg says it disclosed $800 million in debt sales to a suspected unidentified related party, along with details of how accounting manipulations and poor underwriting caused temporary reported earnings. has fueled the rise — all while insiders scooped up billions in stock.
Hindenburg also alleges that the increase in borrower expansion at Carvana is being enabled by the company’s loan servicer, which is affiliated with Drive Time, a private car dealership operated by Garcia II. According to Hindenburg, “the company appears to be avoiding reporting high delinquencies by extending the loan.”
CNBC could not immediately confirm the claims in the Hindenburg Report.
It’s not the first time the Garcia family and its control of the company have come under fire from some investors, including lawsuits in recent years accusing Garcia of running the company. A “pump and dump” Self enrichment scheme.
Caruana debuted in 2017 after spinning off from Drive Time.
DriveTime was formerly a bankrupt rental car business known as the Ugly Duckling that Garcia II, who pleaded guilty to bank fraud in connection with Charles Keating’s Lincoln Savings and Loan scandal in 1990, ran a dealership network. grew up
Most notably, Carvana still relies on the company to service and collect on automotive vehicle financing, and the two companies share revenue from the loans. The businesses also, at times, sell vehicles to each other, and Carvana leases several facilities from DriveTime in addition to profit-sharing agreements.