Shares of online used-car dealer Carvana Co. rebounded, climbing as much as 8.1% on Wednesday, after experiencing a 14% two-day selloff. This recovery followed a report from Hunterbrook Media on Tuesday indicating that billionaire Mark Walter's significant stake in Carvana is pledged as collateral to Citigroup Inc., citing regulatory filings. The news assuaged investor concerns that Walter might immediately sell his shares to raise cash while he faces a federal probe into his investment empire.
The federal investigation into Walter and businesses associated with his financial empire, reported by The Wall Street Journal on Monday, focuses on whether financial relationships were concealed while more than $20 billion was routed through insurance companies he controls. The probe is being led by federal prosecutors and the Securities and Exchange Commission (SEC).
Walter's connection to Carvana is substantial, as he indirectly controls CVAN Holdings LLC, which owned 8% of the company's Class B common stock as of March 10. The report of his pledged stake helped to calm market jitters, with chief market strategist Matt Maley at Miller Tabak + Co. noting that the recent decline was due to a supply issue rather than a fundamental one, and the pledge report temporarily eased those worries.
Walter, who is the CEO of Guggenheim Partners and has agreed to sell the Los Angeles Lakers for $12.5 billion amid the federal probe, did not immediately respond to Bloomberg's requests for comment regarding whether the pledge agreement with Citigroup is still in place. Carvana officials were also not immediately available for comment.
