Carvana (NYSE: CVNA) had its Illinois dealer's license suspended after state regulators received over 90 complaints about title transfer issues. This isn't the first time Carvana has faced problems with its licensing, having been hit with a temporary suspension in North Carolina and nearly having its Florida license suspended.
Speaking to Automotive News, a Chicago Secretary of State spokesperson said that the company had failed to transfer titles to customers after a vehicle purchase properly. According to complaints, the company "misused" out-of-state registration permits and even issued customers expired permits. Per the spokesperson, there is no timetable for Carvana's license to be reinstated.
Its title-transfer practices have already brought it legal troubles, with customers and investors bringing suits against the company. Disgruntled customers left with expired plates and legally-undrivable cars filed a class-action lawsuit in Pennsylvania, alleging that the company violated the state's Unfair and Deceptive Trade Practices Act. Law firm Pomerantz LLP, which specializes in securities and antitrust litigation, is investigating whether the company has engaged in fraud or unlawful practices on behalf of investors.
The suspension comes amid the company's fall from stardom as a Wall Street darling that outperformed amid the pandemic. While the mostly-online car dealer initially benefited from the surge of online shopping as COVID-19 spread, Passport to Wall Street's Jaimini Desai noted that the costs to attract sellers and market listed cars were considerably high. Faults in Carvana's business practices are only exacerbated by spiking inflation putting off customers, as well as rising interest rates making raising funding much more difficult.
Given Carvana's recent downsizing, legal troubles, and an apparent inability to handle state bureaucratic procedures, there seems to be plenty of reason for investors to be concerned beyond the company's cratering share price. That isn't to say that Carvana's stock is doing particularly well and should be ignored; however, shares slipped 9.7% on Monday and recovered 8.3% on Tuesday before sliding an additional 8.7% by Wednesday afternoon.