Used car retailer Carvana shorted, accused of overstating net profit by over $1 billion

Glonghui, January 29｜Short-selling firm Gotham City Research has released a report accusing U.S. online used car retailer Carvana of significant accounting misstatements and undisclosed related-party transactions, estimating that net profits for 2023 to 2024 have been overstated by more than $1 billion. The report points out that Carvana's reliance on related entities is much higher than publicly disclosed, specifically highlighting the relationship between Carvana and DriveTime, the latter of which is also controlled by Carvana CEO Ernie Garcia's father, Ernie Garcia II. In addition, the report questions irregularities in Carvana's accounting treatment of sales commissions and post-loan service fees. The firm predicts that Carvana's 2025 10-K report will be delayed, and the 2023 and 2024 10-Ks may be restated, further noting that the company's auditor Grant Thornton may ultimately resign.