A “uniquely difficult environment” was cited as the reason for the used auto retailer Carvana’s giant loss of over (US) $11 billion in the first three months of this year. It was a much larger-than-expected quarterly loss that’s taking a huge toll on the fortunes of the billionaire father and son behind the Phoenix-based company.
Ernie Garcia II and Ernie Garcia III have lost more than $11 billion combined so far this year, according to the Bloomberg Billionaires Index. Together they have voting control of about four-fifths of Carvana, whose shares had tumbled 60 per cent this year through last Wednesday, before the company reported a first quarter loss of $506 million.
The younger Garcia, Carvana’s CEO, has now lost 60 per cent of his net worth, or about $4.1 billion, since the start of 2022. That’s a sharper drop than any other U.S. billionaire tracked by Bloomberg’s index, even exceeding the 46 per cent decline of Netflix’s Reed Hastings.
The senior Garcia’s fortune is down 49 per cent, or about $7.3 billion, though he began selling Carvana shares in late October 2020 when they climbed to around $200 each. The pre-pandemic price was around $90.
Over the next 10 months, he sold stock almost every day as shares continued rising, selling more than $3.5 billion in total, or more than a fifth of his stake, according to Securities and Exchange Commission filings. The stock peaked in August at $376.83 and then began a steep decline.
Carvana benefited from changes in consumer behaviour during the COVID-19 pandemic, but this business model is struggling as restrictions fade, supply is diminished and prices remain elevated.
Carvana was created in 2012 after the younger Garcia spun it out of DriveTime Automotive, an operator of used-car dealerships owned by his father.