Carvana Co., the online auto retailer, has been accused by prominent short-seller Hindenburg Research of impropriety in its business practices. The research firm claims that Carvana’s subprime loan portfolio carries substantial risk and that the company’s growth is unsustainable.
According to Hindenburg, Carvana has lax underwriting standards and uses a company owned by the CEO’s father to boost results. The report alleges that the company approved 100% of its loan applicants, which would be impossible in reality. It also claims that Carvana manipulated its results by selling cars to a car dealer owned by Ernie Garcia II, allowing the company to avoid markdowns.
Carvana has responded to the allegations, saying they are intentionally misleading and inaccurate. The company’s CEO, Ernest Garcia III, and his father have sold millions of dollars’ worth of stock in recent years, raising suspicions about potential conflicts of interest.
The report’s claims come as Carvana’s shares have declined 1.9% after the allegations were made public. The stock had surged 284% last year, but concerns about its debt load and losses may be contributing to the decline.
Source: https://finance.yahoo.com/news/hindenburg-shorts-carvana-accusing-firm-181246154.html