What happened
On Wednesday, investors threw Carvana (CVNA 2.85%) stock sharply in reverse. The company's share price took a nearly 3.2% hit on the day, in contrast to the essentially flat S&P 500 index. A new legal settlement did little to make those investors confident.
So what
Tuesday afternoon near market close, Carvana announced that it reached a settlement with the state of Illinois. In return for admitting it violated Illinois law, it will be allowed to continue transacting vehicles through its online platform and via its car vending machine located in the city of Oak Brook.
In return, the company has agreed to forfeit a $250,000 bond and to be subjected to additional licensing inspections by state officials. If further violations occur, Carvana risks losing its dealership license in Illinois.
The auto retailer had stood accused by the state of being too slow to provide vehicle titles to new car owners; Illinois law stipulates that this must be effected within 20 days of a sale. Carvana was also accused of illegally providing some customers with temporary registrations from out of state to replace expiring Illinois registrations.
Now what
In its press release on the settlement, Carvana didn't directly address the allegations. It did quote its head of corporate affairs Alan Hoffman as saying that "We look forward to working with Secretary [of State Alexi] Giannoulias to ensure customers continue having access to the best car buying and selling experience possible."
While those are heartening words, it's never comfortable for investors to learn about their company's alleged malfeasance, or the payouts and increased oversight that can result from same. So it wasn't shocking that Carvana's stock took a bump on the news.
