When automobile dealerships began to close under shelter-in-place orders in March, online car seller Vroom saw an initial drop-off in customer demand. However, by mid- to late April, things had begun to change as more consumers began visiting Vroom’s online marketplace and making purchases from the safety of their home.
This demand uptick led Vroom management to put a public offering in gear. After pricing its IPO shares at $22, Vroom saw their value more than double on their first day of trading.
We recently asked Vroom CFO Dave Jones to recall the turn of events that led Vroom to enter the public markets last month (June) and explain how COVID-19 influenced their decision-making.
- Vroom had already filed its SEC S1 documents and was preparing for an IPO when in mid-March customer demand began to drop due to COVID-19.
- In late April, the car seller began to see a steady upswing in demand.
- Vroom management realized that its value proposition meant even more to consumers in the current environment because they could buy a vehicle from the safety of their home.
Jones: As you can imagine, we had already filed a confidential registration statement with the SEC and had anticipated going public at some point in 2020—probably in the summer or maybe even the fall. We were well capitalized and had good legacy investors, so we weren’t in any particular rush. In the middle of March, we saw very quickly that demand was dropping both in our business and in the industry. We literally measure demand every day by the VINs in our inventory, so we saw this very quickly.
About April 20, we started to see data that suggested to us that the market was stabilizing—that demand was starting to return and that pricing seemed to have reached a floor. I think that we saw this very quickly as well. We’re really driven by data at Vroom. We’ve got 40 data scientists on the team and a massive investment in technology and data science.
We’re ingesting millions of pieces of data every day from the industry and from our own demand signals and our own inventory, so we saw this as an inflection point. We turned auto acquisitions back on and started ramping up the inventory again at significantly different prices than we had seen in March, so this kind of proved to us that we had made the right decision.
As we were going through this, we realized that the demand seemed to actually be accelerated by the current environment. As you can imagine, our value proposition meant even more to consumers now because they could buy a vehicle from home. They could have it delivered. It’s a touchless delivery, so this is a much safer environment than going out to a dealership that may or may not be open or even going into the peer-to-peer market. When we realized this, we said, “Boy, this might be an opportune time to jump into the public fund-raising world.” We consulted with our board and our investors and decided that it indeed did make sense. It was obviously very well received, so I think that this was a prudent decision. jb
… demand seemed actually to be accelerated by the current environment.
– CFO Jones