Patrick T. Fallon, Bloomberg via Getty Images
The Key Takeaways
- Carvana’s stock fell Thursday, after Hindenburg Research disclosed a shorting position.
- The firm said Carvana's significant turnaround in 2024 is a "mirage" built in part on selling its customer loans.
- Hindenburg also criticized Carvana insiders, namely Chief Executive Officer Ernie Garcia III’s father, for selling off chunks of the company's stock.
Carvana shares (CVNA), a used car retailer online, fell Thursday after Hindenburg Research revealed a shorting position.
Carvana stock nearly quadrupled in value in 2024 due to rising demand for used cars—a huge turnaround after bankruptcy concerns hurt the company’s share price in previous years—but Hindenburg called the success a “mirage.”
Carvana, the company accused on Thursday, sold its auto loan customers’ information to third-parties “largely in the risky subprime and deep subprime space.” Hindenburg has uncovered a $800,000,000 loan sale to an unknown party, according to the company. “related third party” The company said the loan sales accounted for nearly 26 percent of its gross profits over the last nine months.
Carvana has disputed these findings.
"The arguments in today's report are intentionally misleading and have already been made numerous times by other short sellers seeking to benefit from a decline in our stock price," a Carvana spokesperson said in an emailed statement. "We plan to stay focused on executing our plan for another great year in 2025."
Carvana announced third-quarter earnings (EPS) in October that were nearly triple what analysts had expected. Visible Alpha also increased its forecast for the full year. Analysts are also bullish on the average: A consensus target price of $255 represents a roughly 28% increase over Carvana’s close Thursday, which was just below $200.
Hindenburg also targeted insiders who were cashing in, such as Ernest Garcia II the father of Ernie Garcia III. Hindenburg stated that the elder Garcia had sold $3.6billion in shares between August 2020 to August 2021 before the low share prices of 2022-2023. He also sold another $1.4billion over the last year, as the price recovered.
Carvana’s shares fell by almost 2% on Thursday.
The article was updated with Carvana’s comments.
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