Carvana Stock Plummeted Today, Erasing Its 2026 Gains. Here's Why.

Core Insights - Carvana's stock experienced a significant decline of 20% following allegations from Gotham City Research, which accused the company of inflating profits to mislead investors and benefit its largest shareholder [1][1][1] Group 1: Stock Performance - Carvana's stock surged 10,000% over the past three years due to a turnaround effort, which is now being questioned by short sellers [1][1] - The stock fell 15% on Wednesday, erasing year-to-date gains and approaching its lowest price since early December [1][1] - Despite the recent slump, Carvana shares have increased approximately 10,000% since hitting an all-time low in December 2022 [1][1] Group 2: Allegations and Accusations - Gotham City Research claims Carvana overstated its profits by $1 billion for the years 2023 and 2024, while the company reported a total net income of about $550 million for those years [1][1] - The report echoes previous accusations from Hindenburg Research and Jim Chanos regarding Carvana's accounting practices [1][1] - Allegations suggest that Carvana inflated profits through dealings with companies owned by Ernest Garcia II, its largest shareholder [1][1] Group 3: Company Background and Developments - Carvana faced a dramatic decline in value between 2021 and late 2022 before initiating a turnaround in 2023, which included cost cuts and a deal with creditors [1][1] - The company's recent addition to the S&P 500 marked a significant milestone in its recovery efforts [1][1]