Vroom Inc., once valued at a heady $2.5 billion, said Monday it is winding down its online used-car sales business in order to preserve liquidity, as its market cap has dwindled to less than $100 million.
Vroom
VRM,
said it would focus on growing its two remaining businesses, an auto finance company and another offering analytics and digital services for auto retail.
Shares of Vroom fell more than 50% in the extended session Monday. The demise of its online used-car business didn’t appear to impact shares of competitor Carvana Co.
CVNA,
or used-car seller CarMax Inc.
KMX,
both of which were flat in the after-hours session.
Vroom debuted on equity markets in June 2020, three years after Carvana’s IPO and stoking hopes about online car buying amid pandemic constraints.
Carvana ran into its own troubles, however, striking a deal with bond-holders last year to boost liquidity.
Online car buying may be attractive to those looking to skip interactions with car salespeople, casting a wider net for a vehicle, or just enjoying the convenience of online shopping.
The business, however, has proven to be cash-intensive. By the end of 2021, Carvana was riding a continued wave of demand for used cars but bemoaning “significant operational constraints” that came with the surge, both in buying more cars to boost its inventories and in selling them — more last-mile pickups, more customer-care interactions, and more complex title-processing and registration requirements, for example.
Vroom said Monday that under the board-approved “value maximization plan,” Vroom.com transactions are halted and the company plans to sell its current inventory to wholesale businesses.
Vroom also stopped buying additional vehicles and it was “executing a reduction-in-force commensurate with its reduced operations.”
The company planned on raising additional capital. “Despite significant efforts to do so, we ultimately were unable to raise the necessary capital in the current market,” Chief Executive Thomas Shortt said in a statement.
“Obviously, we are very disappointed with this outcome. Two years ago, we set out to build a well-oiled machine, improve unit economics and dramatically improve our customer experience, and I believe we achieved those goals,” he said.
Vroom is “committed to responsibly managing our remaining businesses and prudently deploying our capital as we seek to maximize value for all of our stakeholders,” board chair Robert Mylod said.
Shares of Vroom have lost 43% in the past 12 months, which contrasts with gains of 22% for the S&P 500 index
SPX
in the same period. The company’s market valuation stood at $76 million at the close Monday.