(Bloomberg) — Ernie Garcia II, the father of Carvana Co. Chief Executive Officer Ernest Garcia III, has cashed in on $1.4 billion in company stock since April – a stake now worth $2.5 billion after a blistering rally in the online auto retail industry. shares.
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The elder Garcia has sold nearly 10 million shares of Carvana since April 11, selling all of his Class A shares and converting and liquidating some of his Class B voting shares.
He still has 69.2 million remaining Class B shares, individually or in trust, which make up the bulk of his $17.6 billion fortune. That rating puts him above those of Softbank Group Corp. founder Masayoshi Son, Saudi Prince Alwaleed bin Talal and hedge fund manager Ray Dalio, according to the Bloomberg Billionaires Index.
The 67-year-old early Carvana investor’s transactions are being closely watched. The last time Garcia II sold this many shares was in mid-2021, around the time Carvana hit a record price of $376.83. While it’s still below that level now, at around $240 per share, it’s a remarkable comeback after shares were trading for less than $4 in late 2022.
The rally, driven by a restructuring that boosted sales and cut costs, was enough for its CEO son to earn praise from some longtime skeptics.
“I’m going to break my rule and say congratulations,” Morgan Stanley analyst Adam Jonas, who recently upgraded Carvana to the equivalent of a hold from sell, said during the company’s Oct. 30 earnings call. “It is an excellent performance.”
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Thanks to Carvana, Garcia II has become very wealthy. His net worth of $17.6 billion has increased by $10.3 billion so far this year, thanks in large part to his stake in Carvana.
Selling Carvana stock is a way to diversify the Arizona billionaire’s assets and cash in on the used-car seller’s rally after making substantial investments in the company in recent years. He sold his 9.9 million shares this year for an average of $140. He bought 8.6 million of them in 2022 and 2023 for an average of about $53 each, according to securities filings.
Garcia II also has been steadily converting his more valuable Class B shares into Class A on a one-to-one basis and selling them on the open market at a rate of 75,000 to 100,000 shares per day, according to the documents. His sales were limited by a Carvana 10b5-1 trading plan he adopted earlier this year.
The two Garcias collectively owned 92% of the Class B shares as of Carvana’s most recent proxy filing, effectively giving them more than 80% of the voting control of the company. Garcia III sold $2.1 million worth of stock in May, but has not sold any shares since.
Garcia II must notify the U.S. Securities and Exchange Commission that he plans to sell and wait 30 days, making it difficult to time his trades.
The billionaire’s sales mirror a similar run in 2021, when he sold $2.3 billion worth of stock as shares soared. He quit days after Carvana hit an all-time high in August 2021. The company ran into trouble soon after and its shares plummeted, leading investors to speculate whether the company might go bankrupt.
Such a quick sell-off by an insider could lead shareholders to wonder whether Garcia II, owner of a privately held auto retailer called DriveTime, which has close business ties to Carvana, suspects the stock has peaked again.
“Maybe he just has other alternatives and other investments,” said Nejat Seyhun, a finance professor at the University of Michigan. “The other possibility is that the second shoe did not drop. Perhaps his expectations are that the shares may fall and it is better to sell sooner rather than later.”
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