Hindenburg alleges Carvana concealed $800M loan sales transactions
On the first trading day of the year, short-seller firm Hindenburg Research released a dossier accusing Carvana, an online used car seller, of heavy corporate misconduct. This investigation alleges that Carvana has masked $800 million in loan sales to an affiliated entity and relied on schemes and lax creditworthiness to inflate proven profitability.
That investigation also discovered major insider stock trading that is revealed in the source alongside thorough document checks and nearly 50 interviews with experts from the industry conducted by Hindenburg. Ernie Garcia III and his father Ernest Garcia II have sold more than $3.6 billion worth of Carvana’s shares between August 2020 and August 2021. Again in 2024 when Carvana’s shares increased by 42% an older Garcia sold more shares $1.4 billion.
Carvana dismissed these charges stating that the report was intentional and inaccurate adding that it will proceed to operate on its 2025 strategy.
After the publishing of results presented by Hindenburg’s research firm Carvana’s stock dropped significantly, below the 5% mark before closing at $199.56, down 2%, on January 2, 2025.
Such charges are coming after the company has recorded an aggressive expansionary stage in its operations.
In 2024, the company’s stock rose further by over 300pc as the company implemented cost cutting measures, rearranged its debt profile and recorded improved profitability as a recovery plan spearheaded by the company’s chief executive officer, Ernie Garcia III. However, the company has been accused of engaging in wrong underwriting techniques and sales manipulation which are related to the founder’s previous business experiences.
For now, we do not know how the charges laid out by Hindenburg will impact Carvana’s business and its financial position, looking at a couple of things, we may do well to cautiously carry forward from this analysis.
