Carvana (CVNA) just dropped about $16 a share.
All thanks to a bearish report from the short sellers at Hindenburg Research, which says the CVNA pullback is a “mirage” propped up by unstable loans and accounting issues.
Hindenburg says it uncovered $800 million in loan sales “to a suspected undisclosed related party, along with details on how accounting manipulation and lax underwriting have fueled temporary reported income growth — all while insiders cash out billions in stock,” per CNBC.
However, according to Carvana, the claims are “intentionally misleading and inaccurate.”
They added, “In the 7 years since our IPO, Carvana has been one of the most heavily researched public companies. The arguments in today’s report are intentionally misleading and inaccurate and have already been made numerous times by other short sellers seeking to benefit from a decline in our stock price.”
Analysts are also defending CVNA, including JPMorgan, which brushed off many of the concerns in the Hindenburg report, citing many were “known unknowns that investors have been cognizant of, and have absorbed over the last several years.”
BTIG also said: “In our view, a lot of this ground has been covered by previous short sellers as the report touched on many of the same topics … While plausible questions are raised at times, we find other arguments unconvincing,” as also quoted by CNBC.
That being said, once the fear of the Hindenburg report has been priced in, investors may want to consider using the weakness as a strong buy opportunity.
At this point, the pullback is overkill.
Sincerely,
Ian Cooper
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