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Ernie Garcia III is the chief executive of Carvana, and his father, Ernie Garcia II, is its largest shareholder. The two saw their wealth dip roughly $288 million in the new year so far. The question is where the stock will go next.
Yesterday, a prominent short-seller accused used-car retailer Carvana of lax underwriting, accounting manipulation, and undisclosed transactions worth hundreds of millions of dollars with a related party. The company called the short report “intentionally misleading and inaccurate” in a statement to publications.
Still, its stock dropped in the aftermath. Shares are down about 6% today, a day after the report—and the father-son duo behind Carvana saw their wealth dip, too, on paper.
Ernie Garcia III is the chief executive of Carvana, and one of its cofounders. He founded the company initially as a subsidiary of DriveTime Automotive, a car dealer owned by none other than his father, Ernie Garcia II, who appears to be Carvana’s largest shareholder.
Garcia III saw his wealth sink $115 million, according to the Bloomberg Billionaire Index; he’s still worth more than $6 billion. His father, Garcia II, saw his wealth drop $173 million as of Jan. 2, the day the short report was published. His net worth is about $15 billion, per the Bloomberg Billionaire Index. So the two lost roughly $288 million in the new year so far.
It might not feel like much to them given their combined wealth of about $21 billion, but shares could plummet further in the days to come depending on how the short report is received. To be clear, that benefits Hindenburg Research, the short-seller.
Carvana is a Fortune 500 company, No. 377, to be exact. Carvana made a name for itself by transforming the used-car buying experience, namely via its giant car vending machines. People can search for a used car from the comfort of their home and either have it delivered or pick it up at a fully automated and coin-operated vending machine, as explained in an earlier Fortune story.
In the past five years, shares soared then dropped rather sharply—but were on the rebound. The father-son duo added $11 billion to their combined wealth during a 3,000% stock rebound, Bloomberg previously reported. It was a far cry from the days when the stock was trading at $4 around two years prior.
The short report’s overarching allegation seems to be that the turnaround at Carvana is a “mirage.” Hindenburg claims that the company is “exorbitantly valued,” that the business itself faces major headwinds, and that insiders are cashing out billions of dollars in stock, among other accusations. Fortune could not immediately verify the claims in the Hindenburg report. But the question is where the stock goes next. Yesterday, per CNBC, it closed under $200 per share for the first time since October. It seems as though that’ll be the case today, too.
This story was originally featured on Fortune.com
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