initial public offerings (IPOs) trading on American exchanges

Friday, April 28, 2017

Carvana (CVNA) began trading on the NYSE on 28 April 2017

Carvana Co. operates an e-commerce platform for buying used cars in the United States. 
The company purchases, reconditions, sells, and delivers vehicles. Its platform allows customers to research and identify a vehicle; inspect it using company's proprietary 360-degree vehicle imaging technology; obtain financing and warranty coverage; purchase the vehicle; and schedule delivery or pick-up.

  • The company was founded in 2012 
  • Headquartered in Tempe, Arizona.
  • Sector: Consumer Cyclical
  • Industry: Specialty Retail
  • Full Time Employees: 1,864
  • 15,000,000 shares offered at $15 on 4/28/2017

One of Carvana’s multistory vending machines. The all-glass structure holds up to 30 vehicles, providing a fun and unique pickup experience for customers who have purchased their vehicles on

Ernest Garcia II laughs during Carvana's initial public offering (IPO) on the floor of the New York.
Ernie Garcia III, second left, and his father Ernest Garcia II, center, at the company's initial public offering on the floor of the New York Stock Exchange in 2017.Photographer: Michael Nagle/Bloomberg

Garcia operates DriveTime Automotive, the fourth-biggest used car retailer in the country, and he is separately the biggest shareholder of Carvana, a used car e-commerce company with a hot stock

With Garcia’s son, Garcia III, as CEO, Carvana has been promoted as the “Amazon of cars,” a Phoenix-based technology platform for buying and selling used cars. Consumers can use its web site to buy used cars, obtain financing and arrange for vehicle delivery. Carvana also has eight glass tower vending machines that are as high as eight stories located in cities like Atlanta and Houston, where customers can inspect and pick up purchased used cars.

How it works

Carvana sells used cars online, with a current inventory of 7,300 used and reconditioned vehicles. Customers pick out the cars online and then can schedule a delivery of the car or go pick it up from Carvana’s multistory, coin-operated vending machines, primarily located in Texas. In about two dozen markets, Carvana offers next-day delivery.

The service launched in January 2013, starting in Atlanta, and as of Dec. 31, 2016, had sold about 27,500 vehicles. Carvana began in 2012 as a wholly-owned subsidiary of DriveTime Automotive Group Inc., the used-car dealership chain mostly aimed at subprime borrowers that was formerly known as Ugly Duckling, but it was spun off in November 2014.

Growing losses

Carvana recorded growing revenue of $365 million in 2016, up from $130.4 million in 2015 and $41.7 million the year before. Net losses grew at the same time, however, with the company losing $93.1 million in 2016 after a loss of $36.8 million in 2015, which Carvana attributed to investing “heavily” in growth.

Carvana has raised $460 million from unnamed investors. In January, Ally Financial said it would provide $600 million in financing.

Subject to regulation

Carvana offers financing to its customers for the purchase of the used cars, and uses its own proprietary models to forecast loss rates for the loans it originates. It then looks to sell the loans to third parties “at a premium.” Carvana recorded $13 million in other sales and revenues, which includes the sale of its loans, in 2016.

The sales of receivables make up a “substantial portion” of the company’s revenue, but that could be affected by pending regulations from the Consumer Financial Protection Bureau and the uncertain status of the Dodd-Frank Act under President Donald Trump, the company says in the prospectus.

Other factors that could affect Carvana’s revenue include competition from other used car businesses, particularly if they cultivate more of an online presence, and slowing demand for used cars, which Carvana said could be perpetuated by increased usage of ride-hailing services such as Uber and Lyft.

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