Carvana $CVNA ( ▼ 4.5% ) tumbled sharply after short seller Gotham City Research released a report accusing the used car retailer of significantly overstating its earnings. The stock is on track for one of its worst days in months as investors digest the claims.
Short report questions profit quality
Gotham alleges that Carvana overstated earnings by more than $1 billion across 2023 and 2024. That figure is notable given the company’s reported profits over that period were far smaller, raising questions about how sustainable or accurate those results may be.
The report also argues that Carvana’s performance is heavily tied to affiliated auto finance businesses, suggesting a large portion of its profitability may rely on financial support mechanisms rather than core vehicle sales.
Regulatory risk fears emerge
Beyond accounting concerns, Gotham warned of potential regulatory scrutiny tied to disclosure practices and business relationships. The firm framed the situation as carrying significant downside risk if its findings gain traction with investors or regulators.
Carvana $CVNA has not yet publicly responded to the allegations. Until more clarity emerges, the stock is likely to remain volatile as the market weighs the credibility and potential impact of the short seller’s claims.