A stylized illustration of a cylindrical cup with blue arrows and lines indicating a swirling or rotational motion inside the cup.
Briefs
Finance
Free NewsletterPro Login

Carvana Shares Drop 14% Amidst Short-Seller Allegations

A stylized illustration of a cylindrical cup with blue arrows and lines indicating a swirling or rotational motion inside the cup.
Briefs Finance
Published Jan 28, 2026
Share:
Two toy cars beside a cracked document and magnifying glass, with a red downward arrow, coins, and a bear figure, suggesting financial decline in the auto market.
Summary:

  • Carvana's stock fell 14.2% on Wednesday, closing at $410.04.

  • Short-seller Gotham City Research accused Carvana of overstating earnings by over $1 billion.

  • The firm claims Carvana relies on related parties controlled by CEO Ernie Garcia III's family.

Decline in Stock Value

Shares of Carvana fell 14.2% on Wednesday, marking a significant drop for the online used car retailer. The stock closed at $410.04, which is the company's second-worst trading day in the past year.

Short-Seller Accusations

Gotham City Research accused Carvana of overstating its 2023-2024 earnings by over $1 billion. According to the allegations, Carvana's earnings are heavily dependent on businesses controlled by the family of CEO Ernie Garcia III.

Gotham City claims that the company is more reliant on related parties than previously disclosed.

Financial Disclosures

To support its claims, Gotham City Research published the 2024 audited financials of DriveTime Automotive Group, Inc. and Bridgecrest Acceptance Corp.

Both companies are owned by Ernest Garcia II, who is Carvana's largest shareholder and the father of the company’s CEO. Gotham City stated it obtained these financial records through the Freedom of Information Act.

Concerns Over Financial Practices

The firm also raised concerns about Carvana's business practices. Gotham City stated that the company's earnings are reliant on DriveTime's debt issuance and described some loans as 'toxic.'

The short-seller highlighted accounting irregularities that they believe are propping up Carvana's financial health.

History of Short Selling

This latest accusation is part of a trend where short sellers have targeted Carvana. Hindenburg Research, a disbanded short seller, previously disclosed a bet against Carvana.

They claimed that the company's turnaround was a 'mirage' supported by unstable loans and questionable accounting practices.

Stock Price Journey

Carvana's stock has experienced dramatic fluctuations over the past year. During a bankruptcy scare in late 2022, shares traded for less than $5.

However, the stock price surged to over $477 before the recent decline. This volatility highlights the challenges the company faces in maintaining investor confidence amidst ongoing scrutiny.

Looking Ahead

As Carvana navigates these allegations and the resulting impact on its stock price, investors will be watching closely.

The company's ability to address the concerns raised by short sellers will be crucial for its future performance in the market.

Disclosure

Get Market Briefs delivered to your inbox every morning for free!

No fluff. No noise. No politics. Just finance news you can read in 5 minutes.

Recent News

1 2 3 … 616

Blogs

May 5, 2026
How to Create Multiple Income Streams: A Beginner's Playbook
By Milena Thomas
  • Most people rely on a single income stream from their job - which is also the most heavily taxed.
  • Multiple income streams come from a mix of cash flow, dividends, side businesses, real estate, and royalties.
  • The fastest path for most beginners is starting with one extra stream - usually dividends or a side hustle - and stacking from there.
Read More
May 5, 2026
The 60/40 Portfolio Explained: A Beginner's Guide
By Nate Gregory
  • A 60/40 portfolio holds 60% in stocks and 40% in bonds (or other fixed income).
  • It's designed to balance growth from stocks with stability from bonds.
  • Your "right" mix depends on age, time horizon, income needs, and how well you sleep when markets drop.
Read More
May 5, 2026
How to Invest in Silver: A Beginner's Guide
By Jackson Moreland
  • Silver is both a precious metal and an industrial metal, used in solar panels, electronics, and medical tech.
  • Investors can buy silver four main ways: physical bars and coins, ETFs, mining stocks, or futures contracts.
  • Most beginners are best served by allocating a small slice of their portfolio to silver - usually between 1% and 3%.
Read More
May 1, 2026
Asset Allocation by Age: The Right Portfolio Mix at Every Stage of Life
By Andre Savage
  • Younger investors should hold mostly stocks because they have decades to recover from crashes and benefit from compounding.
  • Allocations gradually shift toward bonds and stable income as retirement approaches, but stocks remain important even past age 65 to outpace inflation.
  • Annual rebalancing is essential - it forces you to buy low and sell high while keeping your portfolio aligned with your actual life stage.
Read More
April 30, 2026
Stablecoin Explained: Why Some Cryptocurrencies Actually Aren't Volatile
By Jackson Moreland
  • Stablecoins are cryptocurrencies pegged to stable assets like the US dollar, giving crypto-style speed and access without the volatility of Bitcoin or Ethereum.
  • Fiat-backed stablecoins like USDC are the safest option, while algorithmic stablecoins have failed spectacularly and should generally be avoided.
  • Stablecoins fit a portfolio as cash reserves with better yields, a hedge against crypto volatility, and a fast, cheap rail for international transactions.
Read More
April 30, 2026
Buy Now, Pay Later Risks: Why This "Easy" Payment Method Is Dangerous to Your Wealth
By Nate Gregory
  • Buy now, pay later services like Klarna, Affirm, and Sezzle are debt products designed to feel harmless while keeping users in a cycle of overspending.
  • BNPL exploits psychological debt blindness, triggers late fees, and damages credit scores without helping users build positive credit history.
  • Building real wealth means waiting 30 days, paying upfront when you have the cash, and avoiding systems built to extract money from your future income.
Read More
April 30, 2026
Dividend Payout Ratio: The Secret Metric That Shows If a Stock Is Safe or Risky
By Jackson Moreland
  • Dividend payout ratio is total dividends paid divided by net income, showing the percentage of earnings a company returns to shareholders.
  • A 20-50% payout ratio is generally safe and sustainable, while ratios above 75% often signal a dividend cut is coming.
  • High dividend yields can be warning signs, not opportunities - safety and dividend growth matter more than the headline yield number.
Read More
April 30, 2026
Ethereum for Beginners: What It Is and Why Smart Investors Are Paying Attention
By Milena Thomas
  • Ethereum is a blockchain platform that runs smart contracts, while Ether (ETH) is the cryptocurrency that powers the network.
  • Use cases include decentralized finance, NFTs, gaming, supply chain tracking, and digital identity - many still experimental.
  • Most investors should treat Ethereum as a small allocation hedge using dollar-cost averaging, not a get-rich-quick lottery ticket.
Read More
April 30, 2026
Dollar Cost Averaging Strategy: How to Beat Emotion and Build Wealth Steadily
By Nate Gregory
  • Dollar cost averaging means investing the same amount at regular intervals regardless of what the market is doing.
  • The strategy automatically buys more shares when prices are low and fewer when prices are high, lowering your average cost over time.
  • DCA removes emotion, eliminates the need to time the market, and turns volatility into a mathematical advantage for long-term investors.
Read More
April 30, 2026
The BRRRR Strategy: How to Build Real Estate Wealth Without Big Money Down
By Andre Savage
  • BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat - a five-step framework for scaling real estate without saving for big down payments.
  • The strategy works by buying distressed properties below market value, adding value through smart renovations, and pulling out equity through refinancing.
  • Tax advantages like depreciation and mortgage interest deductions make BRRRR a powerful tool for owners willing to manage tenants and contractors.
Read More
1 2 3 … 20
0 Shares
Share via
Facebook
X (Twitter)
LinkedIn
Mix
Email
Print
Copy Link
Copy link
CopyCopied