(Bloomberg) — Carvana Co. said it has acquired Ali Financial Inc. to sell the lender to acquire up to $4 billion in used-vehicle loans over the next year. has reinstated an agreement with , a move that counters a claim by retailer Hindenburg Research. The financier was pulling back on their relationship.
Most read from Bloomberg
The deal, announced in a filing Monday, will preserve a relationship that is core to Caravana’s business. The company sells used cars online, makes loans to its customers and sells receivables to other lenders. According to a report by BNP Paribas, Ally has historically bought enough acquisitions to fund 50% of Carvana’s new origination.
A Carvana spokesperson said the terms of the loan deal are the same as previous agreements.
Carvana shares rose 3.2% at 11:49 a.m. in New York on Monday. The stock surged 284% last year as improved results fueled optimism that the company was on the right track after concerns about its debt load and losses. The stock fell 1.9% on January 2 when the Hindenburg report came out and another 11% on January 3.
The Hindenburg report, written after conducting research that included interviews with former employees, said lending standards for Caravana borrowers were lax and that the development would not be sustained if lenders did not buy their loan receivables. will not be able to keep
The retailer called Carvana’s recent turnaround “a miracle,” saying some of the results came from opaque related party transactions with firms owned by Ernie Garcia, father of Carvana Chief Executive Officer Ernest Garcia III.
In his report, Hindenburg stated that Alley was retreating from Caravana. The lender expects $3.6 billion in 2023 and gained $2.2 billion from January to September last year, an annualized rate of just $2.9 billion. With the revised arrangement, Carvana will be able to continue selling loans to Ally.
Carvana rose sharply after its initial public offering in 2017, with shares hitting a high of $370 in August 2021. But the company took on a lot of debt to fund growth just before used-car prices collapsed. The company is expected to post a $2.9 billion loss in 2022 and its stock ended the year at a low of $3.72 amid speculation it could file for bankruptcy. The elder Garcia sold $2.3 billion before the shares crashed and another $1.4 billion last year as the stock rallied.
