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Online Car Retailer Vroom Raises $467.5 Million in its U.S. IPO

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【Summary】Online car retailer Vroom raised $467.5 million in its U.S. initial public offering on the NASDAQ, the company said, as the IPO market picks up momentum after the global coronavirus pandemic virtually shut down new and used car sales. The IPO values the company at $2.48 billion.

FutureCar Staff    Jun 09, 2020 2:35 PM PT
Online Car Retailer Vroom Raises $467.5 Million in its U.S. IPO

The internet revolution is quickly making technologies that were once very popular a thing of the past, including DVD players and hailing a cab in the age of ride-hailing services. However, technology is also making a big impact on the traditional auto sales model. 

The internet has made it possible to perform a nationwide search for a used vehicle and complete the transaction entirely online. No longer does a buyer have to find a particular car model locally and head to the dealership to haggle over the price and complete the transaction.

As a result, a new crop of online auto sellers has emerged, including Vroom and Carvana. The sector is also attractive to investors and New York-based Vroom just launched its U.S. IPO.

Vroom raised $467.5 million in its U.S. initial public offering on the NASDAQ, the company said, as the IPO market picks up momentum after the global coronavirus pandemic virtually shut down new and used car sales.

Vroom priced its IPO at $22 a share, above the initially marketed range of $18 to $20, valuing the company at $2.48 billion. The company sold 21.25 million shares compared with the earlier plan of 18.8 million shares. The stock was up 117.73% and reached $48.69 in after hours trading on Tuesday.

As businesses around the country shuttered, Vroom is one of the companies that saw an increase in business during the mandatory stay at home orders in place for most of the U.S. The pandemic has led to a boom in online shopping, including for used cars.

Vroom filed its IPO last month and reported a more than twofold increase in sales during the first quarter of 2020 during the height of the pandemic, which created a large increase in e-commerce sales. 

Reuters reports that Vroom's revenue for the first quarter ended March 31 jumped 60% from a year earlier, and net loss attributable to Vroom's common stockholders narrowed to nearly $41.1 million from $45.1 million.

Vroom allows customers to find a used car online, calculate their monthly payment and apply for financing. All vehicles are inspected by Vroom to ensure they are mechanically sound. Vroom also offers vehicles warranty protection, such a powertrain warranty. 

Vroom's business caters to both car sellers and buyers looking to reach a nationwide market. Vroom buys its vehicles, reconditions them and then lists them online for sale. Once a vehicle is purchased, Vroom will arrange for delivery anywhere within the lower 48 states.

The company has also partnered with a dozen major banks to find car buyers the best interest rate, but customers can also pay with cash or arrange their own bank financing.

Although shelter in place orders are being lifted across the U.S., many consumers have warmed to the idea of using e-commerce for a variety of goods, as well as taking advantage of new curbside pickup options at retailers across America. Buyers are making purchases online they haven't normally done before, including shopping for used motor vehicles. 

Vroom is hoping that this upward e-commerce trend continues and it can continue to lure customers away from traditional car dealerships to the online marketplace for used vehicles.

Vroom's chief rival Carvana is also emerging from the economic fallout of the coronavirus pandemic. Caravana's sales have recovered dramatically and are already up 26% on-year as the economy begins to restart, after plunging nearly 80% in a month during the height of the pandemic.

Vroom shares listed on the Nasdaq Tuesday under the symbol "VRM." The online auto retailer backed by T Rowe Price Associates and Catterton Partners.

resource from: Reuters

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