From Aug 2021 to Dec 2022, Carvana stock plunged 99%. CEO’s father Ernest Garcia II sold $3.6B in stock before that.

After the 63x rebound, he just sold another $1.4B.

Funny timing?

Carvana sells used cars online, but their real business is originating auto loans. They make money by quickly selling these loans to other cos.

But now their main buyer (Ally Financial) is pulling back. When they needed a savior, a mysterious buyer took $800M in loans.

The buyer? Supposedly a trust affiliated with Cerberus Capital, where Carvana Director Dan Quayle is Chairman of Global Investments.

A report shows 44% of their loans since ’02 are underwater. Delinquencies 4x industry avg.

Former director says “We approved 100% of them”

Carvana’s avoiding reporting the higher delinquencies by granting loan extensions enabled by its loan servicer, an affiliate of private car dealership DriveTime.

And you guessed it? It’s run by Carvana’s CEO’s father.

There are a litany of accounting red flags —Inflates profit metrics by ~34.5% by moving $390M in selling costs to “SG&A” —Carries $553M in loans with no loss reserves —Manipulate earnings between Qs by timing loan sales

“You can move very large amounts of income around”

Carvana also created a secret “economy line” with lower standards with reduced brake pad requirements, accepting cars “looking like they were out of a war zone”.

Yet told investors in Aug ’23: “vehicle quality metrics have been stable”

Their auditor is also very sus, — Includes NYSE-suspended member — Same person previously sent money to CEO’s father — Mid-tier auditor for 10+ years — Carvana has an undisclosed SEC investigation ongoing!

The coming storm seems all too obvious — $4.8B in net debt — Must pay $215M annual interest starting 2025 — Used car prices are down -20.3% in 3 years — Subprime delinquencies higher than 2008

The big picture: While insiders have cashed out $5B+, Carvana never raised significant capital to de-risk its balance sheet.

Hindenburg’s concludes “The Garcias will leave shareholders with nothing.”