09/17/2020

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cars in parking lot

Online Car Seller, Shift, Aims for an IPO



Online Car Sales Surge


Shift Technologies Inc, an online platform for buying used cars, is planning an IPO for the third quarter of 2020.

Online car sales have boomed during the coronavirus pandemic due to a combination of factors. First, traditional car lots have been closed, creating a need for alternative ways to buy vehicles. Additionally, some people have decided to buy cars in order to avoid public transportation where COVID-19 infections may spread easier. Lastly, used cars may also be attractive to consumers hoping to save money during uncertain economic conditions.

Shift is hoping to draft off Carvana (CVNA), and Vroom (VRM), two companies offering similar services. Carvana made its public debut in 2017. Since then, the price of its shares has increased eightfold. Vroom went public on June 9, 2020 ,and its stock price has more than doubled.

Hopes for Big Growth


In 2019, Vroom, Carvana, and Shift combined sold less than 1% of the used cars sold in the United States. As of now, none of the three companies are profitable, as they are all pouring money into advertising. However, as evidenced by Vroom and Carvana’s rising stock prices, investors are excited about how much room for growth there is in the online used-car sales sector.

Carvana’s sales doubled in 2019 to hit $3.9 billion. Vroom’s sales were up 40% and reached 1.2 billion. Shift has predicted that its sales will hit $400 million in 2021—up from $194 million in 2020.

A Non-Traditional IPO


Shift will make its public debut through a reverse merger. Insurance Acquisition Corp. (INSU), a special-purpose acquisition company, will buy a minority stake in Shift and then privately sell its shares to raise $185 million when the merger happens.

This plan will give Shift an enterprise value of $415 million and allow the company to raise more capital faster than a traditional IPO. Because Shift’s competitors are larger and have more funding, this move could put Shift in a better position to keep up with Carvana and Vroom.


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