"Carvana ( NASDAQ:CVNA ) shares had rallied 13% in 2026, reaching a high of $486.89 per share before a short-seller report from Gotham City Research disrupted the momentum. Yesterday's report alleged the used car dealer's finances rely on undisclosed related-party transactions with entities controlled by its largest shareholder Ernest Garcia II - who is also the father of Carvana's CEO - inflating earnings by over $1 billion and masking its true dependencies."
"Gotham City Research's claims Carvana's 2023-2024 earnings are overstated due to opaque dealings with related entities like DriveTime Automotive, Bridgecrest Acceptance, and GoFi. Gotham obtained financial reports from these parties through Freedom of Information Act requests, though their accuracy has not been independently verified. The report highlights DriveTime's role, stating it generated over $1 billion in negative operating and free cash flow for 2023-2024 but raised equivalent debt to offset this. DriveTime's leverage reportedly stands at 20x to 40x adjusted EBITDA, far exceeding historical norms, with interest coverage below 1x. Bridgecrest - described in Carvana filings as a third-party servicer with low fees of 0.117% annually - is accused of originating loans for Carvana-sold vehicles without being identified as a related party. Gotham identified dozens of such loans via public records"
Carvana's stock rallied early in 2026 before a Gotham City Research short-seller report alleged undisclosed related-party transactions inflated earnings by more than $1 billion and obscured dependencies on entities tied to its largest shareholder, Ernest Garcia II. The report cites DriveTime generating over $1 billion in negative operating and free cash flow for 2023-2024 while raising equivalent debt, with leverage of 20x–40x adjusted EBITDA and interest coverage below 1x. Bridgecrest is accused of originating Carvana loans without related-party disclosure. Carvana called the allegations inaccurate but has not issued a detailed rebuttal, leaving investor uncertainty about future disclosures.
Read at 24/7 Wall St.
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