Carvana’s (CVNA) shares are retreating for a second straight day after a short seller issued a negative report about the firm yesterday. Today CVNA stock is giving back 5%.
Carvana specializes in allowing consumers to purchase automobiles online.
An auto warehouse filled with newly acquired used cars.
The Negative Report
According to Hindenburg, which has established a short position in CVNA stock, the retailer utilizes overly lenient underwriting standards for the loans with which it provides the buyers of its automobiles. In fact, a former director of the company said that the firm approves all of the loan applications that it receives, Hindenburg alleged. The short-selling firm predicted that the auto retailer’s ability to sell those loans would weaken over time.
What’s more, Carvana improves its financial results by selling vehicles at high prices to an auto dealer called DriveTime, which is owned by the father of its CEO, Hindenburg reported. Finally, DriveTime, which services some of Carvana’s loans, extends many of these deals and provides Carvana with very favorable terms on its extended warranties, according to Hindenburg.
Carvana Denies the Allegations
Responding to Hindenburg’s charges, Carvana wrote that “The arguments in today’s report are intentionally misleading and inaccurate and have already been made numerous times by other short sellers.”
The Recent Performance of CVNA Stock
In the last month, Carvana’s shares have slumped 24%, but they are still up 300% in the last 12 months.
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Disclosure: None. This article is originally published at Insider Monkey.