Shift Technologies last week became the latest online used-vehicle retailer to go public, as investors seek opportunities to disrupt the auto market, aided by the tailwind of coronavirus-influenced shopping trends.
With a reverse merger, shares began trading on the Nasdaq exchange under the symbol SFT on Thursday, Oct. 15. Instead of a traditional initial public offering, Shift joined with Insurance Acquisition Corp., a so-called blank-check company created for just such a deal.
The time was ripe, despite the recession caused by the COVID-19 pandemic. Demand is high for used vehicles and more consumers prefer to shop online, because of stay-at-home orders or general wariness of the sometimes fatal disease. The trends have helped boost the value of rivals Carvana and Vroom, and Shift, too, is looking to capitalize on being a publicly traded firm.
"Twelve months ago, or 18 months ago, they were kind of seen a little bit more as speculative," Lee Krowl, an analyst with B. Riley, said of online used-vehicle companies. What was not long ago seen as a "novelty" — buying used cars online — is now "almost a necessity for a lot of people," he added.
As recently as April, it was not clear how the used-vehicle market in the U.S. would hold up for traditional dealers and online companies. Retail used-vehicle sales at franchised dealerships during the first 12 days of April tumbled 63 percent vs. the same period in 2019, according to J.D. Power.
But as new-vehicle inventory ran low this summer, demand for used models came roaring back and has remained strong into the fall. Carvana now expects to report record third-quarter revenue and break-even operating profits, which would be a first for the business in its three-and-a-half years as a publicly traded company.