Shares of TrueCar Inc. climbed 12 percent in their market debut today, after the online car-shopping site raised less than expected in its initial public offering.
The company, which sold all 7.8 million shares offered, raised about $70 million after the stock was priced at $9 per share, well below the expected range of $12-$14.
The shares rose to $10.06 at 4:00 p.m. in New York after reaching $10.75 in Nasdaq trading earlier.
General nervousness among equity traders prompted the offering price to drop to $9 per share, TrueCar President John Krafcik said. TrueCar had expected the IPO to yield as much as $125 million.
“We are launching into fairly choppy markets,” Krafcik said in a phone interview today.
The shares were priced at $9 and placed privately on Thursday ahead of their trading debut today.
In the two weeks leading up to today’s trading, Krafcik said TrueCar executives, including CEO Scott Painter, met with 60 groups of potential investors. He said management shared how TrueCar is helping to bring transparency to vehicle shopping to the benefit of dealers and consumers.
A recent TrueCar study showed that respondents were comfortable with dealerships earning a 10 percent profit on new-vehicle sales when the reality today is that they earn less than 4 percent. Those same consumers thought the margin was 20 percent, Krafcik said.
In an interview today on CNBC, Painter said that sites like TrueCar that can save consumers time and money would play an increasingly important role in the car-buying process. More than 90 percent of car buyers do some or all of their new-vehicle shopping online.
Painter rang the opening bell at the Nasdaq exchange this morning hours before the company’s stock began trading under the symbol TRUE. At New York’s Times Square, he was surrounded by Krafcik and other staff members, participating dealers and well-wishers.
Proceeds from the IPO will be used to fund growth and roll out new products such as TrueLoan, TrueLease and TrueTrade.
Painter, 45, started TrueCar in 2005. TrueCar allows consumers to shop for cars online from participating dealership franchises, which today number about 7,700.
At the start of trading, Painter is TrueCar’s fourth-largest shareholder with 10.3 million common shares, or 14 percent of the company, according to TrueCar’s IPO documents filed with the Securities and Exchange Commission.
In 2013, Painter received a salary of $313,186, a bonus of $231,918 and stock options valued at $5.2 million.