Carvana to become public company
Arizona car retailer plans to issue IPO with shares at $15
Arizona could have a new public company soon if a proposed initial public stock offering goes through for Carvana Co.
The fast-growing online car retailer, based in Phoenix but eventually moving to Tempe, plans to raise around $210 million by selling stock to the public at a proposed $15 per share.
The firm will be tightly controlled by its 34-year-old CEO, Ernie Garcia III, and his father, DriveTime founder Ernie Garcia II. Together they will hold more than 95 percent of Carvana’s voting shares if the initial public offering or IPO goes as planned.
Proceeds from the stock sale mainly will be used to retire debt and transfer some shares to Ernie Garcia II. DriveTime is a 23-year-old used-car dealership network based in Tempe.
Former U.S. Vice President and Arizona businessman Dan Quayle is scheduled to join Carvana’s board of directors. Quayle also is a senior executive of Cerberus, a private investment group that owns supermarket company Albertsons and other businesses.
Quick research, inspection and delivery of used vehicles
Carvana has grown quickly since its launch in early 2013 by offering customers the ability to research and inspect used vehicles, arrange financing, add warranties and coordinate vehicle delivery or pickup in as few as 10 minutes through the use of desktop computers, cellphones or other devices.
All vehicles are sold with a seven-day return policy and 100-day warranty. Carvana allows prospective buyers to view vehicles using 360-degree remote cameras.
The company operates in the highly fragmented used-auto market, where the leading brand controls a modest 1.6percent market share. About 38 million used cars and trucks were sold in North America in 2015 at average prices above $18,500, Carvana said in a filing for the proposed stock sale.
The company, which has a current inventory of about 7,300 vehicles, currently operates in 21 metro areas, primarily in Texas, the Midwest and the South. It counts just over 1,000 employees.
Carvana has been growing rapidly, with widening losses, as it invests heavily in growth. In 2015, for example, the company lost $36.8 million on revenue of $130.4 million. In 2016, it lost $93.1 million on $365.1 million in revenue. Vehicle sales nearly tripled from 6,523 in 2015 to 18,761 last year.
The company operates unusual “vending machine” structures in a few markets where customers can insert special, oversize coins and watch as robots retrieve their vehicles and deliver them to a bay for pickup. The process is a formality as the cars or trucks have been purchased ahead of time.