Online auto retailer Vroom Inc. saw its shares more than double on Tuesday (June 9) on their first day of trading following the company's initial public offering (IPO). The firm’s stock traded as high as $47.50, up 115.9 percent from the stock’s IPO price of $22. However, it later pulled back a bit to $44.10 shortly before 3:30 p.m. ET, up some 100.5 percent.
Vroom sold some 21.2 million shares and granted underwriters an option to buy as much as about 3.2 million more, raising more than $400 million. The sale valued the company at some $2.5 billion, but Tuesday’s rally took that over $5 billion. In a June 2 announcement, the firm initially estimated the IPO price at $15 to $17 a share, then raised it to $18 to $20 ahead of the final $22 pricing.
The stock, which trades on the NASDAQ under the symbol “VRM,” is rallying even though Vroom lost $41 million on $376 million in revenue in its latest quarter. That compares to a $27 million loss on $235 million in revenue for the same period last year.
The company had previously raised $254 million in a Durable Capital Partners-led Series H funding round in December of 2019. T. Rowe Price Associates, L Catterton and others participated.
Vroom has created a platform that puts the process of purchasing a vehicle directly under the control of buyers and sellers, without any car dealer or other intermediary needed.
In a recent conversation with Karen Webster, Vroom CEO Paul Hennessy said the firm has seen a “small chilling factor on the business” from the COVID-19 pandemic. However, he noted that consumers still want to buy and sell cars even in today’s turbulent times. They’re also more receptive than they’ve ever been to using a digital channel for car purchases or sales, he said.
Hennessy added that many consumers didn’t really like the auto dealership experience even before the pandemic, and the hurdle was getting them to try that first digital purchase. The CEO believes the pandemic and the related rise in online buying could be the jolt the industry needed to promote a much quicker adoption of digital car sales.
Vroom’s IPO comes as a spate of FinTech, InsurTech and other financial services firms staged or announced what seem likely to be successful public offerings. Actual or expected strong IPOs for Lemonade, Shift4 Payments and other companies are a nod to the sea change underpinning the financial space in general, as well as recognition by investors of the “great digital shift” that seems to be underway.
As PYMNTS has noted, the overarching theme is that digital marketplaces can simplify how things have traditionally been accomplished, jettisoning paper and face-to-face meetings.