Online car dealer Vroom has secretly filed for an initial public offering, according to a report from the Wall Street Journal. The timing of the IPO suggests that Vroom believes the pandemic will increase demand for contactless vehicle shopping.
The IPO will be led by Goldman Sachs, with other investors including Allen & Co., another major Vroom investor, Wells Fargo. Bank of America. and Stifel Financial, the article states, citing people familiar with the matter.
Vroom offers door-to-door delivery and completely online sales, which it backs with a seven-day money-back guarantee. The company, which is based in New York, operates nationwide. It has a reconditioning and logistics center in Stafford, Texas, and also owns Texas Direct Auto, a brick-and-mortar dealership in Houston that provides home delivery and claims to be the No. 1 car seller in the world on EBay Motors.
The pandemic has thrown a wet rag on IPOs, with only two moving forward in April, according to the Wall Street Journal article.
However, Vroom may have been emboldened by rival online used car seller Carvana, which saw its share price jump recently after a steep drop at the onset of Covid-19. Carvana’s shares haven’t fully recovered, but have fared better than those of conventional car retailers like CarMax and AutoNation.
Carvana also reported a surge in sales in recent weeks. During a call with investors last week, CEO Ernie Garcia boasted that the pandemic has grown Carvana’s market share, a possible long-term adjustment.
Last year, Vroom projected sales of $1.1 billion in 2019, 30% up from 2018, according to the Wall Street Journal. In comparison, Carvana reported revenue of $3.9 billion in 2019, up nearly 100% year-on-year.
Vroom’s drive for an IPO might be a counterpunch against Shift, a San Francisco-based competitor that has floated plans to go public in 2021. As of last year, Shift’s operations were confined to major cities in California and Oregon. But, the company has raised a total of $300 million in financing, making it a formidable opponent should it choose to expand.