Top 10 things to know about Carvana, the latest company under Hindenberg Research’s gaze
Hindenburg Research claims online used car sales company Carvana has $800 million in questionable loan sales linked to undisclosed related parties, raising concerns over accounting practices. After the report, Carvana's shares fell nearly 5 percent.
United States-based short seller Hindenburg Research has alleged that online car dealer Carvana Company has $800 million in loan sales under a suspected undisclosed related party transaction, as per a report released on January 2. It has taken a short position on the business and stocks tanked by close to 5 per cent after Hindenberg's report was published.
“Our research uncovered $800 million in loan sales to a suspected undisclosed related party, along with details on how accounting manipulation and lax underwriting have fueled temporary reported income growth,” alleged Hindenburg Research in its report titled — “Carvana: A Father-Son Accounting Grift For The Ages.”
Shares of the $44 billion company dropped nearly 5 per cent after the short seller released the report. The company's main business is to provide retail customers with an online platform to buy and sell used cars.
Top 10 Things You Need To Know
- Carvana is a $44 billion car e-tailer headquartered in Tempe, Arizona.
- Online car sales company was founded in 2012 and is led by co-founder, Chairman and CEO, Ernest Garcia III.
- Carvana’s main business is an online platform that allows retail customers to buy and sell used cars, which accounts for around 70 per cent of its total revenue, per the company’s latest quarterly report, the Hindenberg report said.
- Carvana offers financing, insurance and other services such as car protection plans.
- Besides its main business, Carvana also a wholesale auction business, called ADESA, which it acquired in May 2022. ADESA has 56 locations where registered auto dealers can participate in auctions, either virtually or on-site. Carvana also acquires vehicles in these auctions.
- Carvana sources its roots to a used-car dealership chain called DriveTime, which was by Ernest Garcia II, a key Carvana shareholder. Garcia was conivted of bank fraud in 1990 after pleading guilty to helping a company report fake accounting income through sham transactions.
- His son, Ernest Garcia III, aka Ernie, has been the CEO of Carvana since its inception.
- Carvana went public on the New York Stock Exchange (NYSE) through direct listing route in April 28, 2017. Its market capitalisation at present is around $44 billion.
- Carvana now operates at scale, having expanded its presence to cover 81.1 per cent of the US population, according to the Hindenberg report.
- As per data availble till September 30, 2024, Carvana had more than 45,000 vehicles available for sale on its website.
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