New Report Claims Carvana's Post-Pandemic Recovery is All a Sham
Carvana’s recent recovery should be the subject of MBA classrooms for years to come. After a massive stumble following a COVID-driven surge, the company has seemingly removed its foot from the grave and recovered. While Carvana stock has rocketed up 284 percent since its low, a recent report from Hindenburg Research suggests that it could all be a mirage.
Carvana grew like wildfire during the COVID-19 pandemic. The company’s online, remote shopping process and home delivery were exactly what car buyers needed during lockdowns. Used car pricing surged, helping Carvana grow quickly, but it also meant the company had to pay more for its inventory. As prices began to normalize, Carvana found itself stuck with tons of stock that would eventually be sold at a loss.
That led to a steep decline for the company, but Carvana appeared to have clawed its way back, raising red flags for some. Hindenburg accused Carvana’s father-son leadership team of running a grift, saying that the investment dollars are flowing right back out of the business, enriching some investors. Additionally, the report claims that Carvana’s finance team used creative accounting to disguise losses as expenses in other areas.
Those are big allegations, but the report goes much deeper. It also accuses the father, Ernest Garcia II, of selling stock worth $3.6 billion before the stock crashed by 99 percent and of selling another $1.4 billion after the stock recovered.
[Photos: Around the World Photos, rblfmr via Shutterstock]
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Chris grew up in, under, and around cars, but took the long way around to becoming an automotive writer. After a career in technology consulting and a trip through business school, Chris began writing about the automotive industry as a way to reconnect with his passion and get behind the wheel of a new car every week. He focuses on taking complex industry stories and making them digestible by any reader. Just don’t expect him to stay away from high-mileage Porsches.
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Truly shocking revelations. How come only Hindenburg discovered these HUGE frauds? (not that I expected our own goofball Tim to ever do so). I 100% TRUST Hindenburg because it NEVeR to my knowledge made an accusation against any company that WAS NOT TRUE. The next few months should be interesting.
Carvana itself seems like a sham. All sizzle, no steak. They made hay during the mysterious virus of unknown origin, but since then got exposed. When they eventually go tango uniform, it could be a good place for homeless rehab centers due to distributed locations close to services.