Shares of Carvana (NYSE:CVNA) stock are down 30% since the company reported earnings on April 20. For the first quarter, the used-car seller reported its first drop ever in quarterly sales. Carvana sold 105,185 cars during Q1. Meanwhile, its net loss tallied in at $260 million, up from a loss of $36 million in the prior-year period.
Rising interest rates, falling used-car prices and increased inflation have all cast a shadow over Carvana’s business model. However, the company’s largest shareholder appears to believe now is the ideal time to buy CVNA stock.
Here’s what investors should know about the Carvana share purchases moving forward.
Ernest Garcia II Buys CVNA Stock
Ernest Garcia II is the father of Ernest Garcia III, the CEO of Carvana. He is also a substanial owner of CVNA and was instrumental in helping his son establish the company. Carvana was originally a subsidiary of DriveTime Automotive, which was founded by Garcia III. DriveTime eventually spun off Carvana as a separate entity.
According to a Form 4 received by the U.S. Securities and Exchange Commission (SEC) on April 26, Garcia II purchased a whopping 5.1 million shares of the company. Garcia II purchased the shares at an average price of $80. In total, the purchase amounted to $408 million.
Out of the 5.1 million shares, around 3.4 million were purchased directly by Garcia II. The remaining shares were purchased through trusts and an investment firm that Garcia III is affiliated with. These include the Ernest Irrevocable 2004 Trust III and Verde Investments.
After the purchase, Garcia II now directly owns 3.36 million shares of Class A stock and 38.94 million shares of Class B stock. Through his trusts and investment firm, Garcia II also indirectly owns 2.39 million shares of Class A stock and 31.78 million shares of Class B stock.
Why Did Garcia II Buy More Carvana?
So, why exactly did Ernest Garcia II make these recent purchase? For starters, shares of CVNA stock are down over 70% year-to-date (YTD). Garcia II is also a veteran of the used-car business, so he is familiar with the cycles of the industry. As a result, Garcia II most likely sees long-term upside for the company.
Garcia II’s recent purchase contrasts with his massive sales last year. In September 2021, he reported selling over $3.6 billion of Carvana. In an annual report, the company also stated that “The interests of the Garcia Parties may not in all cases be aligned with our stockholders’ interests.”
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
