Carvana Targeted by Short Seller, Sending Shares Tumbling

Carvana Co.’s shares fell the most in more than nine months after a short seller alleged the online auto retailer overstated earnings with the help of close ties to businesses controlled by the family of Chief Executive Officer Ernie Garcia III.

The report by Gotham City Research alleged that Carvana has not fully disclosed all the benefits it receives from DriveTime, a privately held used-car retailer and subprime lender owned and controlled by Ernie Garcia II, the father of Carvana’s CEO. Those have inflated the resurgent used-car seller’s publicly disclosed earnings by about $1 billion in 2023 and 2024, the report said, adding that Carvana will have to delay filing its annual report.