Core Viewpoint - Carvana's stock experienced a significant decline following allegations of inflated earnings due to undisclosed related-party transactions, raising concerns about the company's financial integrity [2][3]. Financial Performance - Carvana shares rallied 13% in 2026, reaching a peak of $486.89 before a report from Gotham City Research caused a 15% drop, closing at $410.04, resulting in a 4% decline for the year [2][3]. - Gotham City Research claims that Carvana's earnings for 2023-2024 are overstated by over $1 billion due to undisclosed transactions with related entities [4][5]. Related-Party Transactions - The report highlights that DriveTime Automotive, a related entity, generated over $1 billion in negative operating and free cash flow for 2023-2024 while raising equivalent debt, with leverage reported at 20x to 40x adjusted EBITDA [5][7]. - Bridgecrest Acceptance is accused of originating loans for Carvana-sold vehicles without being identified as a related party, suggesting that Carvana sells these loans at premiums to book gains [6][7]. Market Impact - The allegations have led investors to reconsider their investment strategies, moving away from a "hands off" approach to more active management in light of potential undisclosed risks [7].