Carvana: From Powerhouse To Flop

Carvana’s origins can be traced back to DriveTime Automotive, the used car dealership chain that’s owned by Ernest Garcia II. Garcia II’s son, Ernest Garcia III, reportedly founded Carvana as a subsidiary of his father’s company after graduating from university, and originally all of Carvana’s inventory was bought directly from DriveTime. Garcia II also injected a significant amount of start-up capital directly into Carvana, amounting to around $100 million, according to Forbes. A few years later, Carvana was spun off to form a standalone company, no longer purchasing its stock from DriveTime.

Forbes notes that, although Garcia II provided a significant amount of the initial funding for the firm, and was also the biggest shareholder, he was not listed as a director or officer of the company when it was spun off. The report speculates that one of the reasons for this was due to Garcia II’s previous conviction for bank fraud, relating to dealings with a previous company. Instead, it was Garcia III that became the CEO and the public face of Carvana. In 2017, the company debuted on the New York Stock Exchange, but this initial launch was far from perfect. After launching at $15.00 a share, the stock plunged to around $8.50 a share, at which point Garcia II reportedly bought a further 465,000 shares. His investment proved a shrewd one, as by the year’s end, the stock was back to trading above the price of its initial offering.

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