Carvana Co (NYSE:CVNA) saw its stock price fall about 10% on Wednesday, as market participants appeared to adopt a cautious stance ahead of the company's scheduled quarterly earnings report next week and in the wake of continuing legal scrutiny.
Market nervousness has been driven in part by a sharp report from short seller Gotham City Research published last month. That report accused the company of accounting irregularities and called attention to undisclosed related-party transactions. A specific focus of the criticism was the relationship between Carvana and DriveTime, an entity controlled by Ernie Garcia II, who is the father of Carvana's CEO.
Investor concern increased further after a recent court action in an ongoing case. A judge granted plaintiffs' motion to compel production of DriveTime attachments that had been withheld during discovery by Garcia Sr. Those materials were ordered to be produced subject to an "Attorneys Eyes Only" protective designation.
While there is no single, identifiable trigger for Wednesday's share movement, the combination of a looming earnings report and the legal developments cited above appears to have contributed to a weakened investor tone toward the stock. The company is set to release its quarterly results next week, a timing that may amplify scrutiny as market participants weigh the allegations and the court order alongside financial performance.
The recent short seller report and the judge's ruling represent distinct pressures on Carvana's market perception. The short seller's allegations centered on accounting practices and related-party dealings, while the judicial action compels the production of documents tied to DriveTime that had previously been withheld from discovery. Both items are factual developments referenced by investors as they consider near-term risk around the company's shares.
Given the circumstances described above, the stock's decline on Wednesday reflects heightened investor sensitivity to upcoming disclosures and ongoing legal matters rather than any newly reported financial figures. The situation will likely remain under observation until the company issues its quarterly filing and until further legal proceedings clarify the implications of the produced documents.
Summary
Carvana's shares fell approximately 10% amid investor caution ahead of quarterly results and following a short seller's report and a court order to produce DriveTime-related documents under an "Attorneys Eyes Only" designation.