Carvana, the online used car dealership, is under fire once again for its business practices. Hindenburg Research, a short seller, has accused the company of hiding dealings with private equity firm Cerberus Capital Management. According to Hindenburg, Carvana sold $800 million in auto loan receivables to Towd Point Auto Trust, an entity that appears to be controlled by Cerberus.
The allegations are particularly concerning given that Dan Quayle, a former US Vice President and current director on Carvana’s board, is also a senior executive at Cerberus. Hindenburg claims that this connection indicates the true identity of the buyer, contrary to Carvana’s claims.
Carvana has denied these allegations, stating that the buyer was an “unrelated third party.” However, industry experts suggest that this may not be the case. The alleged partnership between Carvana and Cerberus raises questions about the company’s financial transparency and potential conflicts of interest.
The stakes are high for Carvana, which has been under investigation by the US Securities and Exchange Commission since 2020. The company’s shares have faced significant scrutiny in recent years, with lawsuits from parties including pension funds, car dealerships, and investors alleging various forms of wrongdoing.
Investors should take note that the alleged Cerberus-Carvana dealings may indicate a larger issue with Carvana’s business model. The company generates most of its income by selling auto loans to third-party buyers, but recent data suggests that Ally Financial, its largest buyer, is pulling back on purchases due to “credit challenges.”
As the situation unfolds, it remains to be seen whether Carvana will be able to weather these allegations and maintain its position as a leading online used car dealership.
Source: https://www.forbes.com/sites/johnhyatt/2025/01/02/in-short-sellers-crosshairs-a-former-vp-and-trump-billionaire-ally