Why Investors Were Piling Into Carvana Stock Again This Week

One very vocal critic of the management and business conduct of Carvana (NYSE: CVNA) is apparently shutting down, in a rather unexpected and surprising move. This helped keep the stock's rally alive for a second straight week. According to data compiled by S&P Global Market Intelligence, its price was up by over 20% week to date as of early Friday morning.

A critical firm departs

That critic is short-seller firm Hindenburg Research, which has become somewhat famous -- or infamous, to some -- for its scathing reports about its target companies. Hindenburg's list of shorts includes Carvana, whose stock price declined following a recent takedown from the short-seller.

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On Wednesday, the firm's founder Nate Anderson divulged that Hindenburg is to be disbanded following the last of its "Ponzi cases." This presumably refers to the series of short-seller reports, many of which have negatively impacted the stocks being profiled.

In fact, Carvana might just be the last of those "Ponzi cases." Just after the start of the new year, Hindenburg published a report titled "Carvana: A Father-Son Accounting Grift For the Ages." The headline referred to CEO Ernie Garcia III and his father, Ernest Garcia II, and it reflected Hindenburg's highly critical allegations that management has engaged in dubious business practices to boost the value of Carvana stock.

Will those reports live on?

Hindenburg has been quite the gadfly for the companies it targets thanks to those reports, which are well written and convincingly argued (albeit not always entirely persuasive). I'm not sure Carvana investors should be popping the Champagne upon its demise, though, as Anderson seemed to hint that certain aspects of his firm might live on.

He wrote that he aims "to work on a series of materials and videos to open-source every aspect of our model and how we conduct our investigations." This implies that the firm's reports might live on in some capacity, if only as examples of how it did its work.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.