What happened 

Shares of the online car-buying company Carvana (CVNA 9.26%) were plunging this morning, likely after a Barron's article published over the weekend said that the company, in some cases, sold cars before it even had the title to them. 

The automotive stock was down 6.3% as of 11:18 a.m. ET. 

So what 

Barron's said in its reporting that Carvana was selling cars too quickly during the pandemic, when demand for buying a car online soared, which led to problems in receiving the proper title for vehicles for some customers.

Windshields of cars in a row.

Image source: Getty Images.

Apparently, enough people have experienced this problem that a lawsuit is being brought against the car seller, saying that some customers went years without legally being able to drive vehicles purchased from Carvana. 

The company responded in the article, saying in a "very small percentage of instances," customers didn't receive permanent license plates or a transferred title within the appropriate time under state regulations. 

The report also said that some states have since begun keeping a closer eye on Carvana to ensure that it's complying with state vehicle registration laws. 

Now what 

Carvana's share price has plummeted, along with those of many other stocks lately, as investors process rising inflation and the Federal Reserve's response to it with aggressive interest rate hikes. Adding to investors' pessimism is that fact that the company recently announced that it would lay off about 2,500 of its employees.

And with the recent report highlighting some potential problems with how Carvana registers its vehicles, it's no wonder why the automotive stock is falling further today.