A Personal Note From Our Founder.

We are short shares of Carvana. Please see our report for our full disclaimer:. $CVNA.

Instead, the company has pushed off creditors and engaged in accounting games while the CEO’s father dumps billions in stock. We think Carvana is truly an accounting grift for the ages— we see rough times ahead for both stockholders and bondholders. (50/x).

Overall, we think the Garcias will leave shareholders with nothing. At any point in Carvana’s two incredible stock runs, it could have raised significant capital and de-risked its balance sheet. (49/x).

Finally, Carvana is subject to an undisclosed SEC investigation, per Disclosure Insight, a Freedom of Information Act (FOIA) intelligence firm. We think the company should clarify to the market whether it has faced SEC investigations and their status. (48/x)

Overseeing all this for 10+ years is Carvana’s mid-tier auditor, Grant Thornton, which also has/had a relationship with related-party DriveTime. “We are not doing what the market thinks. We are not looking for fraud…” – Former Grant Thornton UK CEO. (47/x)

In Aug '23, $CVNA told investors cost reduction measures did not impact quality. But a former reconditioning leader told us otherwise: . “They did make an adjustment to the standards, but only for that segment. They call it their economy line. I don't think they talk about.

In Q3 2024, Carvana reported $3,497 in retail gross profit per unit, a key metric for investors to understand the profitability from the sale of retail units. Carvana inflates this key metric by ~34.5% by dumping an estimated $390 million of selling costs into SG&A annually, in.

Two days later, Carvana announced the “best quarter in company history,” featuring a massive earnings beat from re-accelerated loan sales, as well as the successful restructuring of its debt. The Garcias are up ~$427 million on those precisely-timed purchases. (44/x).

Against this backdrop, with the stock price depressed, the Garcias signed an agreement to purchase $126 million in Carvana stock on July 17th, 2023. (43/x).

For example, on May 4th, Carvana reported Q1 2023 earnings, showing a 41% y/y decline in loan sales, swinging to negative adjusted EBITDA amidst bankruptcy concerns. CEO Ernie Garcia blamed the delayed loan sales on “uncertainties” in the securitization market. (42/x)

Carvana uses an accounting treatment that records no loss reserves on these loans at booking. A former executive confirmed that Carvana could “move very large amounts of income around quarter to quarter” by holding loan sales over the quarterly line. (41/x).

Carvana’s CEO has said: “We don't end up taking the credit risk over an extended period of time.”. Yet Carvana’s loans held on its books have increased 50% since 2021, to $553 million in Q3 2024. (40/x)

In addition to the grab bag of related-party tricks, Carvana exhibits a litany of other accounting issues. (39/x).

Carvana’s CEO’s father previously pled guilty to felony bank fraud over allegations that he helped a company report fake income through sham transactions. SEC charges also alleged he “signed a falsified letter for [the company’s] auditors”. (38/x).

One “independent” member of the audit committee, Greg Sullivan, was previously suspended by the New York Stock Exchange after he sent money to Carvana’s CEO’s father in contravention of a prohibition order, per legal records. (37/x)

These sketchy related-party dealings seem to be enabled by conflicted board members. Carvana’s “independent” audit committee has two individuals that served on the board of related-party DriveTime. (36/x).

Carvana engaged in “sham” deals with DriveTime, along with numerous other improprieties, per allegations in a 2024, 332-page amended class action lawsuit brought by two pension funds, which included information from 12 confidential witnesses. (35/x)

A former Carvana director responsible for wholesale inventory told us:. “[Selling cars to DriveTime is] a lever that's not talked about. It's kind of like Fight Club… there's certain things we don't talk about, and we don't talk about DriveTime.”. (34/x).

Additionally, instead of marking down inventory, Carvana can offload cars to related-party DriveTime at a premium. Over the last three fiscal years, Carvana has generated $105 million revenue from selling cars wholesale to DriveTime. (33/x).