Carvana’s Massive Success Is a ‘Mirage:’ Report

Two years ago, it appeared Carvana’s future was full of empty used-car vending machines. The online auto retailer’s stock was near worthless, fueled by massive financial losses and legal problems related to vehicle titles in numerous states. With billions of dollars in debt, bankruptcy seemed inevitable. But in November 2024, a restructured Carvana reported a net income of $148 million. And now stocks are selling at approximately $191 per share.

Some might call Carvana’s two-year turnaround a miraculous turn of events. However, a recent report from Hindenburg Research calls it a “mirage” driven by questionable accounting practices and sketchy partnerships. Before going further, it’s important to note that Hindenburg Research is an investment research firm and a noted short seller. In its report, the firm states it has “taken a short position in shares of Carvana Co. (NYSE:CVNA).”

The very extensive report claims Carvana’s numbers don’t add up when compared to current market conditions. The company’s activity in the subprime loan segment is mentioned extensively, with an alleged former Carvana director telling Hindenburg Research that the company approved 100 percent of applicants. With delinquencies rising, the report alleges that bad loans are given generous extensions so Carvana doesn’t have to report them.

The situation is further muddled by Carvana’s loan servicer, which is reportedly an affiliate of DriveTime, a used car company run by Ernie Garcia II—the father of Carvana’s CEO. This same individual, according to the report, dumped billions worth of Carvana stock before the big collapse in 2022. He also pled guilty to bank fraud in 1990.

Speaking of DriveTime, the report alleges Carvana engages in iffy car dealings with the company, including “sham” deals cited in a 2024 class-action lawsuit. Unreported costs of extended warranties are also associated with DriveTime, along with a litany of other financial tapdancing. Carvana is also apparently the subject of an SEC investigation, though details of it aren’t mentioned.

The takeaway from all this, per Hindenburg Research, is that Carvana is padding the numbers to create a windfall for its CEO, Ernie Garcia III, and his father.

Carvana didn’t respond to our request for comment. CNBC cites a Carvana spokesperson as saying the arguments in the report “are intentionally misleading and inaccurate and have already been made numerous times by other short sellers seeking to benefit from a decline in our stock price.”