Carvana (CVNA) Shares Tumble as Forensic Research Firm Hindenburg Takes Aim, Concludes Company's Turnaround is a "Mirage" - Hagens Berman

Core Insights - Carvana Co. (CVNA) shares dropped nearly 13% following a critical report by Hindenburg Research, which raised concerns about the company's financial practices and disclosures [1][5]. Company Investigation - Hagens Berman has initiated an investigation into Carvana, focusing on the accuracy of the company's disclosures regarding related party transactions in compliance with accounting and SEC regulations [2]. Hindenburg Research Report - The report titled "Carvana: A Father-Son Accounting Grift For The Ages" is based on four months of investigation, including 49 interviews with industry experts and former employees [3]. - Hindenburg's findings indicate that despite Carvana facing bankruptcy risks in 2022 and 2023, its stock surged 284% in 2024, misleading investors into believing the company had recovered [4]. - A significant aspect of the report is Carvana's $3.6 billion purchase commitment agreement with Ally Financial, which accounted for approximately 60% of Carvana's total vehicle loan originations in 2023 [4]. Market Reaction - Following the report's release, Carvana's stock price fell by $25.84, or 12.7%, over two trading sessions, ending on January 3, 2025 [5]. Related Party Transactions - The investigation is particularly concerned with whether Carvana misled investors regarding the offloading of vehicle loans to a related party, especially as Ally Financial reduced its purchases [5]. - Hindenburg's report suggests that a new buyer, likely a trust affiliated with Cerberus Capital, has emerged as a related party, contradicting Carvana's claims of unrelated transactions [7].