An IPO in this economy? A used-car dealer is revving up for its big debut

It sounds crazy, but some other companies are forging ahead with plans to go public.


May 12, 2020

(Photo by Steven Miric/Construction Photography/Avalon/Getty Images)

Car sales might be at record lows right now, but Vroom — a digital used-car marketplace — filed confidentially for an IPO that it wants to hold next month

It may sound crazy, but there’s some logic to it: Vroom sells many of its cars online, and with the pandemic poised to reshape how we shop, Vroom is all gassed up about its future.

The roadblocks? First, the company’s main competitor, Carvana, already rules the digital car-sales market. In 2019, it earned ~6.6x more in gross profits than Vroom did.

And second, IPOs right now are riskier than ever. As one venture capitalist explained to CNBC, a weak market cuts into a company’s valuation.

Big yikes to this year’s Wall Street hopefuls 

2020 was supposed to be Airbnb’s year. As late as last September, the company promised that it would finally roll out of bed and head over to the trading floor. Now, however, it’s laying off large segments of its staff.

Airbnb’s IPO future looks bleak, but so does everyone else’s: Many big companies — like the footwear brand Cole Haan — delayed their Wall Street blitzes back in March. 

But there’s a silver lining for the markets. Members of the IPO Class of 2019 are actually doing… really well right now. 

Underlying concerns about unprofitable business models persist, but Zoom, Beyond Meat, Slack, and Peloton are all having big years. That might be making some newcomers unusually optimistic. 

A few brave companies are still greenlighting their IPOs 

Here’s a quick roundup:

  • Biopharma is where you’d want to be if you had to launch this year. Four companies had successful debuts during the pandemic, and another is gearing up for an IPO later this month.
  • Sports gambling companies, even though there are basically no sports to bet on right now. On April 24, DraftKings went public in a nontraditional way — through a merger. GAN followed on May 5.
  • Kingsoft Cloud: The Chinese cloud computing company had a big public debut on US markets last week, despite icy US-China relations.

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