IPO could raise as much as $125 million

TrueCar files plans to go public with stock

IPO could raise as much as $125 million

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Online auto-shopping service TrueCar Inc. said today it has filed a statement with the U.S. Securities and Exchange Commission to sell shares in an initial public offering.

Goldman, Sachs & Co. and J.P. Morgan Securities LLC will jointly manage the offering, TrueCar said in a statement issued in a Tweet by founder and CEO Scott Painter.

The number of shares to be offered and the price range haven’t been determined, the statement said. TrueCar's SEC filing said it could raise as much as $125 million from the offering.

Four straight years of rising U.S. auto sales have spawned a flurry of merger and capital-raising activities among online vendors that serve auto retailers.

Last month Dealertrack Technologies, a dealer software company, completed the $1 billion acquisition of digital marketing giant Dealer.com. The price included cash and stock.

The newspaper publishers that own Cars.com also have put the vehicle shopping site up for sale for as much as $3 billion, The Wall Street Journal reported last month.

Other smaller players, including Web site vendor Search Optics,  have raised capital from investors.

TrueCar allows consumers to shop for cars online from about 7,500 participating dealership franchises, which compete for the business with guaranteed prices that a customer can redeem at the winning dealership. It was started in 2005 by Painter, who also founded CarsDirect.com and was an early adviser to electric-car maker Tesla Motors Inc.

Late last year Painter hinted to Automotive News that an IPO was possible in 2014.

"There's a tremendous amount of capital market interest in the business," he said. "And so we've got an exciting 2014 ahead of us, either way.

"And I think, you know, if we ultimately take on additional capital or we become a public company, I don't think anything changes other than we just will have the resources to grow bigger and faster."

TrueCar reported a 68 percent jump in revenue in 2013 to $134 million, while its net loss narrowed to $25.1 million from $74.5 million, according to the SEC filing.

Remarkable turnaround

The IPO, should it be completed, would mark a remarkable turnaround for TrueCar.

In early 2012 the company nearly went out of business when regulators from multiple states questioned TrueCar’s advertising methods and contended that the company’s method of being paid by dealers only after a car was sold violated various laws prohibiting brokering by unlicensed parties.

The regulatory scrutiny was spurred by dealers who complained that TrueCar was fostering hyper-competition, so much so that dealers were losing money on their TrueCar vehicle sales.

Painter called the crisis, which happened during his wife’s pregnancy, “a near-death experience” for TrueCar.

Only after much soul-searching did Painter stay on and engineer a restructuring of the company’s business model, which put the focus less on cut-throat pricing for consumers and more on providing a fair transparent price that offered a profit for participating dealers.

The key change was eliminating the ability of competing dealers to see in real time what rivals were bidding on price to win customers. Instead, bidding was made blind to prevent dealers from often racing to the bottom on price and losing money on their new-car deals.

Back in compliance

By mid-2012, TrueCar was back in compliance on all states and gradually coaxing dealers back to the company. During the crisis, participating franchises fell nearly in half to 3,200.

TrueCar’s recovery in 2013 has brought new investors and talent into the fold.

Recently, TrueCar raised $30 million from Vulcan Capital, a fund controlled by Paul Allen who was a co-founder of Microsoft with Bill Gates. Just this week, the company announced that John Krafcik, former Hyundai Motor America CEO, had joined the TrueCar board of directors.

Vulcan Capital owns a 9 percent stake in the company. Painter owns 12 percent, the filing says.

Since its founding, TrueCar users have bought more than 1 million vehicles from participating dealers. Many of those buyers are members of associations and groups, such as USAA and AAA, that offer the TrueCar buying service as part of their offerings. TrueCar calls those associations affinity partners.

Bloomberg contributed to this report.

You can reach David Barkholz at dbarkholz@crain.com. -- Follow David on Twitter and


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