Is Carvana Really In A Turnaround?

Carvana’s Initial Issues
You may remember back a few years ago where we had done some reporting on this channel. You can see in this video clip that we were concerned that Carvana, the major auto retailer, was having problems. There were some criminal accusations, and there were major title problems. We were hearing from clients every single day about how they were having title issues and not getting titles for vehicles. There were some questions about their accounting back then and whether or not they were even going to stay in business. Did they have enough money? And we reported on this. We had probably eight or nine videos over the course of six or eight months that talked about whether or not Carvana was even a legitimate company, allegedly.

The Turnaround and Initial Resolution
Well, all of a sudden these problems seemed to go away. They bought an auction company called Adessa. They moved some money around. They changed around their financial statement and all of a sudden it looked like they were in great shape. Their stock went up. Their company seemed like it was being rebounded and so it kind of faded away.

New Allegations Surface
But it seems like we were a little ahead of our time. This article came out today in Automotive News where Hindenburg Research, which is a company that looks for publicly traded organizations or corporations hiding problems on their books, questioned Carvana’s accounting practices and called the turnaround a mirage. So that turnaround that happened two and a half, three years ago made it seem like the company all of a sudden was in great shape. It was kind of curious. We even questioned in one of our videos, like, how did this happen all of a sudden? Where they were at one point on the ropes, back against the wall, and then a couple months later they were doing great. It’s not like they were selling many more cars, their business wasn’t that much different. It’s just that their finances all of a sudden got better. We questioned how did that happen? And since, you know, it wasn’t that big of a deal to us, we kind of let sleeping dogs lie.

Forensic Audit Results
Well, this article comes out to say they made accusations that they did a forensic financial audit and they found 800 million in loan sales to a suspected undisclosed related party, and that there was accounting manipulation and lack of underwriting resulting in temporary reported income growth. So what they’re saying, basically, is the income growth, the business development, the rise in sales was all smoke and mirrors. It’s kind of what they’re saying, allegedly. Their research, including extensive document review and 49 interviews with employees and related parties, shows that Carvana’s turnaround is a mirage. It’ll remain to be seen whether or not this is accurate, but it is a troubling report coming out from a major analyst.

Closing Thoughts
Now granted, they’re short sellers, so they bet on companies going down, but who knows whether or not this video we did a couple years ago, “We Told You So, Carvana in Trouble,” was a precursor for this major problem with Carvana. Stay tuned and let us know if you’re having problems with any Carvana titles or any dealership titles for that matter.

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