Old car seller Carvana said it faced a “uniquely difficult environment” in the first three months of the year after reporting a larger-than-expected quarterly loss.
That greatly affects the fortunes of the billionaire father-son duo behind the Phoenix-based company.
Ernie Garcia II and Ernie Garcia III have lost more than $11 billion in total this year, according to the Bloomberg Billionaires Index. Together they have voting control of about four-fifths of Carvana, whose shares have fallen 60 percent this year through Wednesday before the company reported a first-quarter loss of $506 million. Shares fell another 7% at first: 04 pm in New York.
Younger Garcia, the chief executive of Carvana, has now lost 60 percent of his net worth, or about $4.1 billion, since the start of 2022. That’s a steeper drop than any other American billionaire. tracked by Bloomberg’s index, exceeding Netflix’s Reed Hastings’ 46% drop.
Senior Garcia’s fortune is down 49%, or about $7.3 billion, though that was helped in part by stock sales. He began selling shares of Carvana in late October 2020 when they rose to about $200 per share from pre-pandemic levels of about $90. For the next 10 months, he sold shares almost every day as the stock continued to rise, totaling more than $3.5 billion, or more than a fifth of his shares, according to Securities and Exchange Commission filings. and Transactions. His last sale was on August 23, about two weeks after the stock peaked at $376.83 and began to plummet.
Carvana, which provides a platform for customers to buy and sell used cars online, is one of the companies benefiting from changes in consumer behavior during the Covid-19 pandemic. That business model is struggling as restrictions fade and car prices continue to rise.
The company said after the earnings report that it plans to raise $1 billion in a stock offering through Citigroup Inc. and JPMorgan Chase & Co. Garcia III is one of two investors interested in buying $432 million in stock. It raised another $1 billion in preferred stock.
Carvana, like the other darlings of the pandemic, has had a number of high-profile hedge fund backers.
Tiger Global Management owns 7.3 million shares as of December 31, while D1 Capital has 4.2 million shares, the third largest share position in the US.
Other prominent funds that reported large holdings at year-end include Whale Rock Capital Management, Marshall Wace, and Sculptor Capital Management.
Carvana was created in 2012 after young Garcia spun it off from DriveTime Automotive, a used car operator. authorized dealer owned by his father. Since going public in 2017, it has faced scrutiny for its relationships with companies under Garcia’s control.
Carvana purchased thousands of cars from DriveTime to meet increased customer demand during the pandemic, and did not disclose that young Garcia owns a significant stake in DriveTime and other companies that supply services for Carvana, the Wall Street Journal reported in December.
A Carvana spokesperson said working with affiliates gives the company “a unique advantage” and allows for faster growth.
“When, after considering reasonable alternatives, we believed the related party transaction provided the greatest value for Carvana and its shareholders, we pursued the related party transaction. and plans to continue to do so in the future,” the spokesperson said in an emailed statement.