A new report by a prominent research firm and short seller, Hindenberg Research, issued a major red flag on Carvana ($CVNA) The firm accuses Carvana of using risky loans, shady accounting tricks, and secret deals with DriveTime—a company owned by the CEO’s father, Ernie Garcia II—to inflate its financial performance. This is the same research firm whose report tanked Super Micro Computer's by 63% recently and caused the company to nearly be delisted from Nasdaq.  

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Hindenburg claims nearly half of Carvana’s loans go to people with bad credit. These deals allegedly allow Carvana to shift costs, inflate its revenues, and avoid reporting financial losses. For example, Carvana sells cars and loan services to DriveTime at premium prices, which boosts its reported income, even though both companies are closely connected.

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Hindenburg’s findings raise serious concerns about Carvana’s financial health, casting doubt on its recent turnaround story.

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The company’s financial troubles are mounting, with total debt reaching $6.21 billion. Its debt-to-equity ratio is an alarming 2,100%. Combined with a price-to-earnings ratio over 20,000, highlighting concerns about how the company is valued.

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Carvana is an online platform where people can buy and sell used cars without stepping into a dealership and it is under fire after a report by Hindenburg Research. Carvana’s stock is falling, down over 10% in just five days.

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