Carvana (CVNA) Stock Tumbles 14% on Short-Seller Fraud Claims

TLDR

• Carvana (CVNA) shares plunged 14.2% Wednesday to $410.04 after Gotham City Research accused the company of overstating 2023-2024 earnings by over $1 billion
• Short-seller alleges Carvana inflated profits through transactions with DriveTime and Bridgecrest, companies owned by CEO’s father Ernest Garcia II
• Carvana rejected the claims as “inaccurate and intentionally misleading” and reaffirmed its February 18 earnings release date
• The stock has risen 10,000% since December 2022 despite facing multiple short-seller attacks in recent months
• Wednesday’s decline was Carvana’s second-worst trading day of the past year

Carvana stock got hammered Wednesday. The online used-car retailer closed at $410.04, down 14.2%.

Carvana Co., CVNA

Short-seller Gotham City Research triggered the selloff. The firm released a report claiming Carvana overstated earnings by more than $1 billion across 2023 and 2024.

That’s a massive allegation. Carvana reported total net income of approximately $550 million during those two years.

Gotham City claims Carvana inflated its numbers through questionable deals with related companies. The short-seller specifically targets DriveTime Automotive Group and Bridgecrest Acceptance Corp.

Both companies share a common owner: Ernest Garcia II. He’s Carvana’s biggest shareholder and the father of CEO Ernest Garcia III.

The report alleges Carvana is “far more dependent on related parties” than investors know. Gotham City published what it says are 2024 audited financials from DriveTime and Bridgecrest obtained through a Freedom of Information Act request.

Carvana Fights Back

Carvana wasted no time responding. The company issued a statement calling the report “inaccurate and intentionally misleading.”

Carvana insists all related party transactions are properly disclosed in its financial statements. The company also confirmed its February 18 earnings release remains on schedule.

This directly contradicts Gotham City’s claim that Carvana would delay its 10-K annual filing. That’s an important detail for investors watching closely.

History Repeating Itself

Short-sellers have been circling Carvana for months. This is just the latest attack on the company’s accounting practices.

Hindenburg Research took a short position in January 2025. That firm called Carvana’s turnaround a “mirage” built on unstable loans and accounting tricks.

Jim Chanos, one of Wall Street’s most famous short-sellers, also bet against Carvana. He accused the company of aggressive accounting to juice results.

Yet Carvana stock keeps defying the doubters. Shares have rocketed more than 10,000% since December 2022.

Back then, bankruptcy looked likely. The stock traded below $5 per share.

The Turnaround Story

Carvana pulled off a dramatic recovery. The company slashed costs in 2023 and renegotiated its debt with creditors.

That effort paid off big. Carvana joined the S&P 500 last month, a milestone for any company.

Tuesday, shares closed at $477. Wednesday’s drop erased those gains and then some.

The decline marked Carvana’s second-worst trading day in the past year. Shares hit their lowest level since early December.

Carvana will report 2025 earnings on February 18.