Rumor: Jimmie Johnson’s IndyCar sponsor Carvana ‘is in deep trouble’

How much longer will Carvana be able to sponsor Jimmie Johnson’s IndyCar effort?

Ernie Garcia spoke with analysts during Carvana’s (CVNA) – Get Carvana Co. Class A Report earnings call last month, the company’s chief executive officer said the used-car retailer’s first-quarter had been “challenging.”

“Some quarters are bumpier than others,” Garcia said, according to a transcript of the call. “Unfortunately, in the real world, they are rarely perfectly straight lines to anywhere.”

The company had just posted a “confidence shattering quarter,” in the words of J.P. Morgan, as it reported a wider-than-expected loss of $2.89 a share, much higher than the FactSet’s expected loss of $1.44 a share.

Garcia cited such factors as Covid-19’s omicron variant, used vehicle prices, and interest rate rises as contributing factors to the company’s disappointing quarter.

Since January, Carvana shares have fallen 83.4% to $38.40 at the time of writing. Market capitalization collapsed over the period to $6.82 billion from $20.84 billion on December 31. Basically, $14 billion of market cap has been wiped out in less than five months.

Carvana, which went public in 2017 and had been described as “the Amazon of car dealers”, has been taking aggressive measures to turn things around, including laying off 2,500 employees, or about 12% of its workforce.

Carvana is very much a family affair, as Garcia’s father, billionaire Ernest Garcia II is a major shareholder of the battered company.

The elder Garcia pled guilty in 1990 to a felony bank fraud charge related to the collapse of Charles Keating’s Lincoln Savings and Loan Association, and spent three years on probation.

In 1991, he bought Ugly Duckling, a bankrupt rent-a-car franchise for $1 billion. Garcia II took the company public in 1996 and then took it private 6 years later and renamed it DriveTime.

The younger Garcia joined DriveTime in 2007 before co-founding Carvana with Ryan Keeton and Ben Huston. DriveTime is Carvana’s largest shareholder.

Father and son have lost an estimated 80% of their wealth in nine months.

The elder Garcia has a total net worth of $5.23 billion, according to the Bloomberg Billionaire Index, down $9.63 billion since the beginning of the year.