The same shareholders who dumped Carvana’s shares last year as its valuation soared are starting to buy again.
"The active modification of a 10b5-1 plan raises the question of whether someone is trying to rebalance their portfolio, time the market, or is in possession of non-material public information,” says David F. Larcker, a professor of accounting at Stanford Graduate School of Business. “Generally speaking, you would like to have some information about why the plan is being revised, and does that make sense, or are they doing it for other reasons that may not pass regulatory scrutiny.
Garcia II wasn’t the only Carvana insider to cash out during the Covid boom. Over the same 15-month period , Benjamin Huston, Carvana’s chief operating officer, and Mark Jenkins, the chief financial officer, each sold about $38.5 million worth of company shares. Neither of them have bought shares this year. Chief brand officer Ryan Keeton parted with $23.7 million worth of shares, while general counsel Paul Breaux offloaded nearly $5 million.
“Carvana’s actions and the actions of the executives signal to me that the executives knew what was coming, and consequently took advantage of the lofty valuations to both sell their own equity and to issue equity,” says Dan Taylor, an accounting professor at the Wharton School who leads the Wharton Forensic Analytics Lab.Founded in 2012 as the e-commerce subsidiary of Ernest Garcia II’s used car retailer DriveTime Automotive Group Inc., Carvana grew steadily during the 2010s.