The billionaire father and son behind online used car seller Carvana have been accused of insider trading in a lawsuit filed in Delaware by shareholders
in an offering that was only open to company insiders and “certain existing investors,” according to Carvana’s press release. On May 6, Carvana announced first quarter earnings, posting a larger-than-expected loss of $183 million but strong revenue growth of 45% year over year. The following morning, Carvana announced it was expanding its “soon-as-next-day touchless home delivery” to 100 more cities in 25 states, wiping out all of its previous stock price losses and ending the day up 10%.
The suit claims that in late March, when the first share offering took place, Carvana stock was trading in an “artificial trough” and that “insiders used their knowledge of the Company’s actual performance—before the results of that quarter were published—to take a larger chunk of the Company on the cheap.” It goes on to claim that “Carvana was uniquely positioned to address growing customer demand in safer car-buying experiences and had experienced massive growth between February and March.
This isn’t the first time the older Garcia has been accused of self-dealing. He owns and runs used car retailer DriveTime Automotive, which was called Ugly Duckling when he bought it in 1992. Garcia II was hit with six shareholder lawsuits in 2001 alleging he abused his position to profit from Ugly Duckling assets. The suits were combined and settled that year. He denied the accusations in aand argued that Ugly Duckling also benefited.
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