Carvana: What You Pay For Is Not What You Get

Apr. 16, 2019 10:58 AM ETCarvana Co. (CVNA)META, SNAP12 Comments
Glacier Capital profile picture
Glacier Capital


  • Carvana Co. is a holding company and not an operating company.
  • Carvana Co. only holds 28% of the interest in the operating company.
  • Class A common shareholders have less than 3% of the voting rights.
  • More than 70% of the capital in the operating company is represented by non-floating units.
  • The economic spin-off never happened since Carvana Group is still a client and supplier of Drivetime/Verde.


Please note that this is a follow up to my first and second more general articles about Carvana Co. (NYSE:CVNA). I will write another article about Q4 numbers just before the release of Q1 earnings on May 8th. In this article, I want to focus on the structure of the Carvana companies, the low number of floating shares, the Tax Receivable Agreement, the close relationship to DriveTime and several other facts. Let us start with a graph published in CVNA IPO prospectus and republished in the yearly 10K.

Public Shuiolde• Cuda Parties. Cave Em*oyæ, Consultant(Extract of the 2018 10 K)

As you notice, the "Carvana Group" is composed of 4 companies. I will refer to "Carvana Companies" to avoid any confusion with Carvana Group, the operating company. The companies represented by a triangle are transparent companies from a tax point of view. As you can see, the only non-transparent company is CVNA, which is represented by a square. Carvana Co. is the listed company, meaning the company an investor becomes a shareholder of after purchasing the listed shares on the New York Stock Exchange (NYSE) under the symbol CVNA.

We deduct that CVNA is only a holding company, because it just holds units in the operating company, does not hire any employees, does not own any assets (besides the participation in Carvana Group LLC and Carvana Sub) and does not engage in any contracts with suppliers. CVNA consolidates the financial results of the operating company, Carvana Group. Give this, we do not directly notice this fact by just analyzing the numbers in the quarterly and annual filings. The structure as a holding company has two major effects on shareholders of Class A common share.

Manager of Carvana Group

CVNA is not a pure financial holding. In principle, the company has an active role in the management of

This article was written by

Glacier Capital profile picture
Hello, I am based in Luxembourg, Europe. I am a Lawyer that turned Fund Manager mainly because I like the diversity and complexity of investing. In fact, I like studying and understanding myself as well as other investors. I have three masters, in Law, Economics and Finance.My investment strategy turns around my an my counterparties' central hypothesis.I try to base my argumentation on  sufficient conditions that offer a fair risk-return by knowing however that most variables are probably unknown to myself.Interesting would be to understand what variables your subconscious considered? This is also important to determine the degree of luck.Have a nice day/night.

Disclosure: I am/we are short CVNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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