SCHEDULE 13D/A: Carvana Co. Major Shareholder Ernest Garcia II Sells Covered Call Options on 4 Million Shares

Ernest C. Garcia II, a significant beneficial owner of Carvana Co., has disclosed the sale of European-style covered call options on 4,000,000 Class A Shares with an expiration date of April 17, 2026, and a strike price of $400.00 per unit.

Summary

• Ernest C. Garcia II and ECG II SPE, LLC (collectively, the "Reporting Persons") filed Amendment No. 37 to their Schedule 13D regarding their beneficial ownership in Carvana Co.
• As of May 5, 2025, Carvana Co. had 135,023,435 Class A Shares outstanding.
• Mr. Garcia beneficially owns an aggregate of 45,442,317 Class A Shares on an as-converted basis, representing 25.2% of the class.
• ECG II SPE, LLC, wholly owned and controlled by Mr. Garcia, beneficially owns 8,000,000 Class A Shares on an as-converted basis, representing 5.6% of the class.
• On May 9, 2025, Mr. Garcia, through E-SPE, sold covered call options to an unaffiliated third-party purchaser for 4,000,000 Class A Shares.
• These European-style options have an expiration date of April 17, 2026, and a strike price of $400.00 per unit.
• In connection with the Call Option, Mr. Garcia pledged 5,000,000 Class A Units and 4,000,000 shares of Class B common stock of Carvana Co. as collateral.
• Mr. Garcia retains the right to vote the units pledged as collateral during the pendency of the Call Option.
• The Call Option may be cash or physically settled at Mr. Garcia's election.

Sentiment

Score: 5

Explanation: Neutral. The filing details a shareholder's financial transaction (selling covered calls and pledging collateral) rather than company performance. While it caps the shareholder's upside, it also generates immediate premium income and does not directly impact the company's operations or financial health in the short term.

Positives

• The transaction is a covered call, meaning the shares are owned by the seller, reducing risk for the seller compared to naked calls.
• Mr. Garcia retains voting rights over the shares pledged as collateral, maintaining his influence over the company.

Negatives

• The sale of covered call options caps the potential upside for Mr. Garcia on the 4,000,000 shares if Carvana's stock price exceeds the $400 strike price by April 17, 2026.
• A significant portion of Mr. Garcia's holdings (5,000,000 Class A Units and 4,000,000 Class B shares) are pledged as collateral, which could have implications if obligations are not met.

Risks

• If Carvana's Class A Share price significantly exceeds $400 per unit by April 17, 2026, the 4,000,000 shares underlying the call option may be called away, reducing Mr. Garcia's direct ownership.
• The pledging of 5,000,000 Class A Units and 4,000,000 Class B common stock shares as collateral introduces a risk related to the security of these assets, although Mr. Garcia retains voting rights.

Future Outlook

The document indicates that the sold call options will expire on April 17, 2026, at which point they may be cash or physically settled at Mr. Garcia's election, depending on the stock price relative to the $400 strike.

Industry Context

This filing primarily details a specific financial transaction by a major shareholder and does not provide broader insights into Carvana's operational performance or the used car retail industry trends. It reflects a strategic decision by a significant individual investor regarding their personal holdings.

Stakeholder Impact

• Shareholders: The sale of covered calls by a major beneficial owner could be interpreted as a signal regarding the shareholder's view on the stock's near-term upside potential, potentially capping it at the strike price. The pledging of shares as collateral might also be noted by investors.

Next Steps

• The covered call options will expire on April 17, 2026, leading to potential cash or physical settlement.

Key Dates

Keywords

Carvana Co., SEC filing, Schedule 13D, beneficial ownership, covered call options, Ernest C. Garcia II, Class A Common Stock, stock options, collateral, shareholder disclosure