CVNA
Disclosure: As of 2026-02-10, the Runchey Research Model Trading Fund holds put options in CVNA. Per our Editorial Policy, these are classified as Event-Driven holdings and may be adjusted immediately following the relevant catalyst event. View our full Editorial Integrity & Disclosure Policy.
"With $1.9B in GAAP profit built on a pre-tax loss, $600M+ in Garcia family RPTs under SEC investigation, and two short seller reports alleging fraud -- is Carvana's turnaround real or engineered?"
Carvana reported Q4 2025 earnings on February 18, 2026, posting GAAP net income of $1.9B -- but this was driven by a $2.8B non-cash deferred tax asset release on a pre-tax loss of ($890M). Operationally, the company delivered $20.3B in revenue (+49% YoY), 596,641 retail units (+43%), and Adj. EBITDA of $2.2B. However, an active SEC investigation (subpoena June 2025) targets $600M+ in annual related-party transactions between Carvana and Garcia-family-controlled entities, while two major short seller reports allege undisclosed subsidies. Eight AI models analyzed 1,000+ pages of filings through 8 analytical lenses.
Executive Summary
Cross-lens roll-up assessment
Carvana presents genuinely strong and improving operational execution housed within a corporate governance structure that multiple independent lenses classify between CAPTURED and MISALIGNED. Revenue of $20.3B (+49% YoY), 596,641 retail units (+43%), and Adj. EBITDA of $2.2B are genuine achievements. However, GAAP net income of $1.9B is materially distorted by a $2.8B non-cash DTA release on a pre-tax loss of ($890M), while $600M+ in annual related-party transactions with Garcia-family entities lack verifiable arm's-length pricing and are under active SEC investigation. The SEC investigation outcome is the single largest classification sensitivity factor across all 8 lenses, capable of moving multiple assessments in either direction.
HIGHER_SCRUTINY rather than AVOID because the operational turnaround is genuine and the SEC investigation outcome remains uncertain -- enforcement is not a foregone conclusion. However, the combination of CONCERNING accounting integrity (DTA-distorted GAAP earnings), CAPTURED/MISALIGNED governance ($600M+ RPTs, $1.7B TRA, dual-class control), ELEVATED regulatory exposure (active SEC subpoena), and STRETCHED market expectations ($85B cap requiring unprecedented growth AND clean governance resolution) warrants elevated scrutiny beyond standard diligence. The SEC investigation is time-bound and produces discrete outcomes. Until resolution, the governance structure and lack of arm's-length pricing verification on $600M+ in annual related-party transactions prevent classification at standard levels.
Key Takeaways
- •ACCOUNTING_INTEGRITY is CONCERNING (E2, 2/2 agree) -- FY2025 GAAP net income of $1,895M is driven by ~$2,785M non-cash DTA release on a pre-tax loss of ($890M). Operational performance is strong (Adj. EBITDA $2,187M), but headline GAAP figures may mislead. Master Dealer Agreement revenue to DriveTime grew 75% YoY vs. 43% unit growth.
- •GOVERNANCE_ALIGNMENT classified CAPTURED by Fugazi Filter (E3) and MISALIGNED by Insider Investigator (E3) -- Garcia family controls both Carvana and RPT counterparties; $1.7B TRA obligation to related parties; 5/7 officers in 10b5-1 selling plans (~$128M in 2-3 months); shared auditor across Garcia entities alleged.
- •REVENUE_DURABILITY is CONDITIONAL (E2, confirmed by 3 lenses) -- 89.5% of revenue is durable retail vehicle sales, but ~10.5% contributing ~36% of gross profit depends on loan sale partnerships ($18B capacity) and DriveTime-related flows (~$386M).
- •COMPETITIVE_POSITION is DEFENSIBLE (E2, HIGH confidence) -- Vertically integrated infrastructure (34 IRCs + ADESA + logistics) with measurable operating leverage (SG&A +23% vs units +43%). Constrained from DOMINANT by commoditized product, negligible switching costs, and 1.6% market share.
- •CAPITAL_DEPLOYMENT is DISCIPLINED (E3) -- $709M debt retired at 9-11% rates, no buybacks or dividends, organic-only growth, targeting investment-grade credit ratios. $2.2B TRA is structural obligation, not discretionary.
- •TAIL_RISK_SEVERITY is SEVERE -- SEC cascade scenario produces 70-90% equity destruction at 3-10% probability. All 7 lens assessments depend on financial statement accuracy supported by an allegedly non-independent auditor. Restructuring tools from 2022 (PIK, debt exchange) permanently consumed.
Key Tensions
- •Genuine operational execution (DEFENSIBLE moat, DISCIPLINED capital deployment, validated revenue growth) coexists with CAPTURED/MISALIGNED governance and CONCERNING accounting integrity -- a company may build a strong business while governance structures extract disproportionate value from minority shareholders.
- •The SEC investigation outcome is the single largest classification sensitivity factor: clean resolution would likely shift 4+ signals favorably; enforcement action could move FUNDING_FRAGILITY from STRETCHED to STRAINED and deepen CAPTURED governance.
- •Market expectations appear STRETCHED at ~$85B: the 3M unit target requires 38% CAGR (to 2030) or 18% CAGR (to 2035) with no precedent in used auto retail, AND simultaneous clean resolution of all governance and regulatory concerns.
- •Management's blanket denial of short seller allegations ('100% inaccurate') without point-by-point rebuttal during an active SEC investigation was classified as a governance communication gap by 3 independent lenses.
Fugazi Filter
Are the numbers trustworthy?
Dual-Axis Risk Classification
Position shows Accounting Integrity × Funding Fragility
Accounting practices raise questions that warrant deeper investigation before investment. The numbers may not fully reflect economic reality.
Key FindingsClick to expand details
Signal AssessmentsClick for full context
| Signal | Scale | Assessment | Evidence |
|---|---|---|---|
Accounting Integrity | — | CONCERNING | 2Corroborated |
Governance Alignment | — | CAPTURED | 3Triangulated |
Model Debates
Cross-Lens Insights
Where Lenses Agree
- Garcia Family RPT Complex Identified by All 7 Lenses
- SEC Investigation is the Pivotal Unknown (6 of 7 Lenses)
- Revenue Durability is Conditional (3 Lenses)
- Operational Performance is Genuine (4 Lenses)
- Management Communication Gaps (3 Lenses)
Where Lenses Differ
GOVERNANCE_ALIGNMENT Severity
Both used E3 evidence with 2/2 agreement. The difference is analytical framing, not evidentiary disagreement. Fugazi Filter weighted structural architecture more heavily; Insider Investigator weighted observable insider behavior patterns.
Operational Strength vs. Governance Risk
Not contradictory -- a company may genuinely build a strong business while having governance structures that extract disproportionate value. The unresolved question is whether governance will eventually impair the operational trajectory.
Growth Capacity vs. Growth Expectations
Infrastructure capacity does not guarantee demand. Supply-side readiness is necessary but not sufficient for meeting market expectations.
The following publicly available documents were collected and extracted into a structured fact dossier that powered this analysis.
SEC Filing
- Annual Report (10-K) -- FY2025
- Quarterly Report (10-Q) -- Q3 2025
- Quarterly Report (10-Q) -- Q2 2025
- Quarterly Report (10-Q) -- Q1 2025
- Quarterly Report (10-Q) -- Q3 2024
- Current Report (8-K) -- Q4 2025 Earnings
- Proxy Statement (DEF 14A) -- 2025
- Schedule 13D/A -- Garcia Family Holdings (Dec 2024)
- Schedule 13G/A -- Institutional Holdings (Nov 2024)
- Form 4 Insider Transactions (20 filings, Dec 2025 - Feb 2026)
- Form 144 Proposed Sales (10 filings, Dec 2025 - Feb 2026)
Earnings Transcript
- Q4 2025 Earnings Call Transcript (Feb 18, 2026)
- Q3 2025 Earnings Call Transcript
- Q2 2025 Earnings Call Transcript
- Q1 2025 Earnings Call Transcript
- Q4 2024 Earnings Call Transcript
Research Document
- Hindenburg Research -- 'A Father-Son Accounting Grift For The Ages' (Jan 2025)
- Gotham City Research -- 'Carvana, Bridgecrest, and the Undisclosed Transactions and Debts' (Jan 2026)
- CourtListener Litigation Summary -- 10 Cases
Web Source
- Gotham City Research Deep Dive Summary (compiled from Sherwood, CNBC, FinancialContent)
- Google Trends: 'Carvana' search interest (95/100, stable)
- Greenhouse Job Postings: 1,505 listings (50% reconditioning)