1:42 pm, November 8, 2022
US used car disruptor Carvana has been plunged into chaos after its share price plummeted to record lows for the second day in a row.
The firm, which is said to have inspired Cazoo’s business model, saw its value collapse on Monday with stock tanking and investors desperate to escape.
Shares fell to just $6.68 each at the peak of the slump before making a slight recovery to close the day at $7.39, which still represented a 15.6 per cent drop.
Overall, the troubled firm has shed a whopping 97 per cent of its value this year, following all-time highs of $376.83 per share last August.
Since then, the outfit has been dogged by legal difficulties with several states suspending its licences to trade.
Last month, the Michigan Department of State ruled that Carvana posed an ‘imminent harm to the public’ after violating the state’s vehicle code.
The breaches included failing to make an application for title and registration within 15 days of delivery for 112 customers since agreeing to an earlier probation extension and failing to maintain odometer records.
It was also charged with improperly issuing temporary registrations; failing to have records available for inspection during reasonable or established business hours and possessing improper odometer disclosure records on which the odometer disclosure had been signed on behalf of the purchaser.
The state also accused the firm of ‘committing fraudulent acts in connection with selling or otherwise dealing in vehicles where Carvana employees admitted to destroying title applications and all applicable documents pertaining to the sale of three vehicles that were sold to customers and Carvana took the vehicles back’.
There have also been similar allegations leading to licence suspensions in North Carolina and Illinois.
Carvana denies wrongdoing and has hit out at ‘baseless and reckless’ allegations made by the state of Michigan.
A spokesman for the company said: ‘We work collaboratively and in strong partnership with state leaders and regulatory agencies in many states across the country.
‘In most instances, arcane and outdated regulations have struggled to keep pace with our innovative business model, technology and surging customer demand for a new, convenient and accessible way to shop, buy and trade-in used vehicles.
‘We reject the Michigan Secretary of State’s allegations as baseless and reckless and we strongly disagree with the state’s heavy-handed and abrupt effort to shut down a growing Michigan business with tens of thousands of customers over what amounts to technical, paperwork violations involving title and transfer issues.
‘We have already corrected 99 percent of the technical paperwork violations cited in the state’s report and welcome the opportunity to address the state’s ongoing concerns through constructive dialogue, changes to outdated regulations through legislation, or in the courts.’
The drastic loss in value suffered by Carvana is mirrored by Cazoo, which has also seen its stock price fall off a cliff in the past 12 months.
Overall, the British outfit posted a loss of £329m last year.
