"Carvana ( ) shares have surged 3,100% over the past three years, defying critics and short-sellers who pointed to suspicious financial deals involving related parties like DriveTime and Bridgecrest. Despite this run, a January report from Gotham City Research accused the company of hiding over $1 billion in expenses through undisclosed transactions, inflating profits, and deeming the stock "uninvestable." The allegations triggered an immediate plunge in shares that day, and the stock has continued trailing lower over the past two weeks."
"The Gotham City report, titled "Carvana: Bridgecrest and the Undisclosed Transactions and Debts," claims Carvana's 2023-2024 earnings are overstated by more than $1 billion. It highlights deep ties to related entities controlled by Ernest Garcia II, the father of Carvana CEO Ernest Garcia III, including DriveTime, a used-car retailer and subprime lender, as well as Bridgecrest and GoFi."
Carvana shares rose roughly 3,100% over three years before tumbling amid allegations of undisclosed related-party transactions that may have overstated earnings by more than $1 billion. Allegations point to deep ties with entities controlled by Ernest Garcia II, including DriveTime, Bridgecrest, and GoFi, and describe loan-level intermingling, DriveTime cash burn and heavy leverage, and Bridgecrest markdowns that enabled Carvana to recognize gains on sales. The claims have coincided with immediate share plunges, continued stock weakness relative to the all-time high, and a company statement calling the allegations inaccurate and misleading.
Read at 24/7 Wall St.
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