The Expert Podcast

You may remember back a few years ago when 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, major title problems, and we were hearing from clients every single day about how they were having title issues and not getting titles for vehicles. There were also questions about their accounting back then and whether or not they were even going to stay in business. Did they have enough money?

We reported on this extensively, with probably eight or nine videos over the course of six or eight months, discussing whether or not Carvana was even a legitimate company, allegedly. Then, all of a sudden, these problems seemed to go away. They bought an auction company called Adesa, moved some money around, changed their financial statements, and suddenly it looked like they were in great shape. Their stock went up, and it seemed like the company was rebounding. As a result, the issue kind of faded away.

But it seems like we were a little ahead of our time. This article came out today in Automotive News, where Hindenburg Research—a company that investigates publicly traded organizations suspected of hiding problems on their books—questioned Carvana's accounting practices and called the turnaround a "mirage." The turnaround that happened two and a half to three years ago made it seem like the company was in great shape. It was kind of curious; we even questioned in one of our videos how this happened so suddenly.

At one point, they were on the ropes, back against the wall, and then a couple of months later, they seemed to be doing great. It's not like they were selling significantly more cars or that their business was dramatically different. Their finances simply appeared to improve overnight, which raised questions for us. Since it didn’t seem like a big deal at the time, we let sleeping dogs lie.

Well, this article makes accusations that Hindenburg Research did a forensic financial audit and found $800 million in loan sales to a suspected undisclosed related party. They also reported accounting manipulation and lack of underwriting, resulting in temporary, reported income growth. Essentially, what they’re saying is that the income growth, business development, and rise in sales were all smoke and mirrors, allegedly.

Their research included an extensive document review and 49 interviews with employees and related parties. According to their findings, Carvana's turnaround was a mirage. It remains to be seen whether or not this is accurate, but it is a troubling report from a major analyst. Now, granted, Hindenburg Research is a short-seller, meaning they profit when companies fail, but who knows?

Looking back, our video from a couple of years ago, titled Carvana in Trouble, may have been a precursor to this major problem with Carvana. Stay tuned, and let us know if you're having problems with any Carvana titles or dealership titles for that matter.

If you like this video, be sure to check out others on our channel. There may be additional information to help you resolve your issues or related subjects that could be useful.