(Reuters) – Investment firm Kerrisdale Capital on Monday disclosed its short position in Carvana, calling it a “poorly capitalized, growth-challenged auto retailer.”
Carvana shares rose nearly 40% after the used-car retailer reported its first full-year profit last week, a sharp turnaround driven by cost cuts and a debt-reduction agreement with bondholders. The company’s shares were up about 3% in afternoon trading Monday.
“Carvana’s valuation was already inflated – its stock price is now so ridiculous that it is not only trading at unheard-of levels for an auto dealer, but trading at a premium to leading technology companies,” Kerrisdale Capital said in a statement.
As of Friday, Carvana had $2.32 billion in short interest, or 39.6% of its shares outstanding, according to analytics firm Ortex.
“In addition to the disappointing growth outlook, there are signs that further improvement in unit economics may be coming to an end,” Kerrisdale Capital said in a statement.
Carvana declined to comment on Kerrisdale’s report.