Carvana Co. shares saw a significant rebound, climbing as much as 8.1% on Wednesday, August 19, after experiencing a 14% drop over the previous two trading sessions. This recovery was spurred by a report from Hunterbrook Media on Tuesday, August 18, which revealed that billionaire Mark Walter's stake in Carvana is pledged as collateral to Citigroup Inc., according to regulatory filings. This information eased investor concerns that Walter might quickly sell his shares to address issues related to a federal probe into his investment holdings.
Mark Walter, who is the CEO of Guggenheim Partners and TWG Global, is currently facing a federal investigation into his investment empire, and he is reportedly restructuring his assets. The Wall Street Journal had previously reported on Monday, August 17, that federal prosecutors and the Securities and Exchange Commission (SEC) are investigating Walter's businesses for potentially concealing financial relationships involving over $20 billion routed through insurance companies he controls. Despite the probe, neither Walter nor his companies have been charged with any crimes or found liable for civil penalties.
Walter holds a significant stake in Carvana, indirectly controlling CVAN Holdings LLC, which owned 8% of the company's Class B common stock as of March 10. Hunterbrook Media's report, based on Delaware UCC filings, detailed that Citigroup Global Markets Inc. holds a security interest in assets held by CVAN Holdings Sub I, LLC, where TWG holds essentially its entire Carvana position, estimated at approximately 30 million post-split shares, worth around $2 billion. This pledge means Walter cannot easily liquidate these shares without Citigroup's consent, which reduces the immediate "supply-side issue" fear among investors that he might dump his shares to raise cash.
Market strategists, like Matt Maley of Miller Tabak + Co., noted that the prior stock price decline was due to supply-side concerns rather than fundamental issues with Carvana. The revelation about Walter's pledged stake has temporarily alleviated these worries, contributing to the stock's sharp rebound. While Citigroup declined to comment, and Walter did not immediately respond to inquiries, the news helped stabilize Carvana's stock amidst broader investor jitters regarding Walter's financial situation.
