Carvana files for stock offering on NYSE
02 Apr 2017
Carvana, the Arizona-based used car company that calls itself the “Amazon of Cars,” filed paperwork Friday for an initial public offering.
For Carvana to call itself the “Amazon of cars” is like a mouse claiming to be an elephant and hoping no one will notice that it’s really a mouse. (But we digress.)
We’ve reported on Carvana repeatedly since 2014, in both CIR and on AIMGroup.com, and have seen hypergrowth from a zero start, but little more than a sales gimmick and claims that it has unique algorithms for buying cars — much like algorithms developed by half a dozen other companies, including VAuto, a subsidiary of Cox Automotive Group.
Carvana, which was incubated by the used-car dealership DriveTime and is still closely linked to DriveTime, had $365 million in sales and $93 million in losses in 2016 as it expanded into new markets with its highly unusual “vending machine” model. Instead of showrooms, Carvana builds five-story glass-walled “vending machines” where it displays cars.
It has sold about 27,500 vehicles since it launched in 2012, and of the end of 2016 operated in 21 metropolitan markets throughout the U.S.
The company has lost nearly $176 million since its inception, and indicated losses are likely to continue as it grows market share, inventory and the number of markets where it operates.
Carvana plans to list on the New York Stock Exchange under the symbol CVNA. The company did not set a timeline for the IPO or a price range for the IPO shares. The filing noted that founders Ernest Garcia II and Ernie Garcia III, who are affiliated with DriveTime, would own a significant stake in the company with controlling voting power through Class B shares after the IPO. Garcia III is currently CEO.
The filing was made under the JOBS Act of 2012, a law that allows “emerging growth companies” to go public under much more limited reporting requirements than traditional IPOs require.
Separately, we noted last week that an IPO is reportedly in the works for CarGurus, the 11-year-old Boston-based auto site that we profiled as a U.S. traffic leader in our 2017 Automotive Advertising Annual.
As is typical, Carvana’s S-1 filing with the U.S. Securities and Exchange Commission included detailed financial information, potential growth factors, extensive “risk factors,” and information about the companies that would handle the offering.
“We are transforming the used car buying experience by giving consumers what they want – a wide selection, great value and quality, transparent pricing and a simple, no pressure transaction. Each element of our business, from inventory procurement to fulfillment and overall ease of the online transaction, has been built for this singular purpose,” the S-1 said.
“We provide a refreshingly different and convenient car buying experience that can save buyers time and money. On our platform, consumers can research and identify a vehicle, inspect it using our proprietary 360-degree vehicle imaging technology, obtain financing and warranty coverage, purchase the vehicle and schedule delivery or pick-up, all from their desktop or mobile devices. Our transaction technologies and online platform transform a traditionally time-consuming process by allowing customers to secure financing, complete a purchase and schedule delivery online in as little as 10 minutes.”
DriveTime, which launched Carvana as an internal business until it spun it out in 2014, operates more than 140 traditional used-car dealerships around the U.S. targeting “sub-prime” buyers, or those with major credit problems.