Cracks in Controls at Carvana
What one friend stumbled on during a very recent car-buying journey.
Crazy story…
If you missed it, last week Hindenburg Research published a fascinating report on Carvana CVNA 0.00%↑, the car retailer whose stock has made chumps of anybody who dared question either its business model, the way it does business, its related-party dealings, its balance sheet and/or any combination thereof.
I’m among ‘em, having seen the stock rise seven-fold since July 2023, when I wrote my “Dash for Trash – The Carvana Edition.”
Carvana was a classic case of a company saved by a short-squeeze, which elevated its shares to a position where it could raise cash and live to see, in the least, another cycle.
But this isn’t about what Hindenburg wrote, or even what I wrote…
Call from My Friend
A few days before the Hindenburg report ran, I got a call from a friend who had just bought a car through Carvana. It was the craziest story, but there was little I could do with it because it was so random.
Then came the Hindenburg report, which was largely focused on its accounting, related parties and lending activities. As I read it, all kind of light bulbs went off in my head – all tied to my friend’s phone call, which was totally coincidental.
Now, with the Hindenburg report as a backdrop, suddenly it’s not so random and strangely may be a small piece of a bigger mosaic. Or, if nothing else, it spotlights potentially weak internal controls at Carvana, whose sales and profit growth have been surging in recent quarters.
To hear my friend tell it…