Carvana, CVNA, CEO when asked to explain boosted profitability specifically, says "it would take a while to talk about and I would bore your viewers"

A prominent short-seller has accused used-car retailer Carvana of lax underwriting practices, accounting manipulation, and undisclosed transactions involving hundreds of millions of dollars with a related party. Carvana responded by labeling the report “intentionally misleading and inaccurate” in a statement to the press.

Despite the company’s denial, its stock took a hit. Shares fell about 6% the day after the report’s release, and the fallout extended to the fortunes of the father-son team behind Carvana.

Ernie Garcia III, Carvana’s CEO and co-founder, initially launched the company as a subsidiary of DriveTime Automotive, a car dealership owned by his father, Ernie Garcia II, who is also Carvana’s largest shareholder. Following the report, Garcia III’s net worth dropped by $115 million, leaving him with over $6 billion, according to the Bloomberg Billionaires Index. His father, Garcia II, saw his wealth decline by $173 million, bringing his net worth to approximately $15 billion. Together, they have lost around $288 million in 2024 so far. However, with a combined wealth of $21 billion, the losses may not feel substantial—though further stock declines could deepen the impact.

The situation could benefit Hindenburg Research, the short-seller behind the report, as further stock price drops may validate their allegations.

Carvana, ranked No. 377 on the Fortune 500 list, gained prominence by revolutionizing the used-car buying experience. Its giant car vending machines allow customers to shop for vehicles online, then either have them delivered or pick them up at fully automated, coin-operated vending machines.

Over the past five years, Carvana’s stock has seen dramatic swings, soaring and then plummeting before beginning a rebound. The Garcias added $11 billion to their combined net worth during a 3,000% stock surge reported by Bloomberg, a sharp contrast to when the stock traded at $4 just two years earlier.

Hindenburg’s report claims Carvana’s turnaround is a “mirage.” It alleges the company is “exorbitantly valued,” faces significant business challenges, and that insiders have cashed out billions in stock. Fortune could not immediately verify these claims. As of now, Carvana’s stock has dropped below $200 per share for the first time since October, and its trajectory remains uncertain.