The Importance of Being Ernest

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Before I decided to shell out money each month for YouTube Premium, I would constantly be burdened with the task of listening to a commercial for a company I grew to despise, merely because their ad was so insipid. The commercial was from Carvana, and I can hear to this day to idiotic “origin story” they offered (“People said we couldn’t sell used cars online, but we knew we could, so we went to work….……”) Even more annoying than the ads was the ridiculous gimmick of having a huge car “vending machine” where a person would put in a gigantic “coin” and have their car brought down to them in a big elevator.

But, annoyed as I might have been, it was hard to argue with their success. CVNA was the kind of ticker symbol that people adored, and the stock went from $8 to nearly $400. In other words, if you had just invested $8 billion at the IPO, you’d have almost $400 billion at the peak. Anyway, I couldn’t explain their success, but you can’t argue with a chart.

The shills on Wall Street (redundant, I know) played right along, and even when CVNA started hitting some seriously choppy water, the lackey investment banks still played the game. Only months ago, no less an organization than Morgan Stanley offered a price target of $420.

Kindly observe the updated chart below. The price did not reach $420. In fact, the stock isn’t even $42. It is, instead, about eight bucks..………….right where it started. The stock has suffered a 97% drop, and in a perfect world, every single insider would be stripped of every penny they every made from the company, either in the form of salary or stock sale. Their entire net worth should be confiscated. Of course, it won’t happen. Instead, the founders remain multi-billionaires, and the retail buyers have seen untold tens of billions blown off the face of the earth.

What’s remarkable to me is that the guy who founded the place wasn’t exactly a Boy Scout. On the contrary, he was a convicted felon. Ernest Garcia II (how’s THAT for a trustworthy name?) was mixed up in all kinds of shady stuff, the most famous of which was Charles Keating’s massive Lincoln Savings and Loan fraud, which helped bring down the entire S&L industry. There were other suspicious dealings as well, including six lawsuits in 1990s.

I believe I read that, since the senior Garcia II was forbidden from being involved in a public company (or, at the very least, his background wouldn’t pass muster with the IPO road show), he had his son, Garcia III, serve as the public face. In other words, instead of the son being ashamed about his felonious father, he happily decided to be the front man. Thus, father and son because wildly rich, and the public has suffered mightily in the face of this.

Once again, crime pays. I only hope there are some energetic securities lawyers out there who plan to make life miserable for the Garcias for the next few years.