Online Auto Retailer Shift Technologies Plans to Go Public Through a Reverse Merger
【Summary】San Francisco-based online auto retailer Shift Technologies said on Monday it plans to go public later this year through a reverse merger with blank-check company Insurance Acquisition Corp. As the coronavirus pandemic keeps car buyers away from dealer showrooms, online car sellers, including Shift, Vroom and Carvana are seeing a big increase in business.
As the coronavirus pandemic keeps car buyers away from dealer showrooms, online car sellers, including Vroom, CarMax and Carvana are seeing a big boom in business since March.
Earlier this month, online auto retailer Vroom raised $467.5 Million in its U.S. IPO and saw its stock price double, as the coronavirus pandemic has led to a significant increase in online shopping for used cars. Now Vroom competitor Shift Technologies is also making its own plans to go public.
The San Francisco-based company said Monday it plans to go public later this year through a reverse merger with a blank-check company, as U.S. capital markets begin to recover after many companies were forced to put their IPO plans on hold.
Shift plans to merge with Philadelphia-based Insurance Acquisition Corp, a special purpose acquisition vehicle (SPAC) that has no operations of its own. The SPAC will raise $185 million by selling its shares, valuing the combined company at $730 million on a pro forma basis, the companies said in a statement.
Following the close of the transaction, Shift's current management team will continue to operate the combined company.
SPAC's help companies deal with the long and difficult process of launching an IPO in the U.S. Rather than dealing with all of the paperwork, roadshows and drumming up investor interest for an IPO, companies such as Shift can instead merge with another company that's already public.
"Merging with Insurance Acquisition Corp. is the next step in our evolution and will enhance our ability to scale our operations as we continue to deliver one of the industry's broadest selections of used cars via our powerful technology platform. We look forward to partnering in a transaction that provides an efficient path for a successful transformation to a public company," said George Arison, Shift Co-CEO.
Insurance Acquisition Corp. intends to change its name to Shift Technologies, Inc. and remain NASDAQ-listed under a new ticker symbol. The transaction is expected to close in the third quarter of 2020.
Shift, which was founded in 2013, experienced a big increase in business since March, as people are adhering to social distancing guidelines and shopping online for used vehicles instead heading to local dealerships.
Shift thoroughly inspects all of the vehicles listed on its platform with a 150 point safety inspection. If a customer is interested in a particular model listed on Shift's website, a "concierge" will deliver it to their home or business for a first hand look and a test drive.
Shift says its the only automotive e-commerce platform to leverage a patented system and method for managing on-demand test drives.
If a customer agrees to purchase the vehicle, Shift processes all of the paperwork, including DMV forms, title, transfer, and registration. The company also provides financing. To further assist car buyers, Shift tracks millions of data points including past and current prices for similar models to ensure that vehicles are sold at a fair price.
Online-only used car sales are a relatively new trend, but it allows customers to search nationwide for a vehicle, giving them more buying choices.
This online-only sales auto sales momentum, which includes contactless delivery to a customer's home, is expected to continue, even after the coronavirus pandemic subsides as many consumers find it a much more convenient way of shopping.
"We operate in a massive market and we believe that there is a significant opportunity to continue to rapidly grow our business. We are actively pursuing our growth initiatives as we execute on our vision," said Toby Russell, Shift Co-CEO.
To further ensure that Shift's customers are not exposed to the coronavirus, the company is offering an EPA approved antimicrobial treatment at no cost that kills 99.9% of germs with each car its sells online.
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