Less than a decade ago, it was three guys and a lot in Chesterfield County.
Soon, it should be a nearly billion-dollar operation with a nationwide footprint.
CarLotz, the Richmond-based former startup that sells used vehicles on consignment and splits profits with the owners, has shifted into the fast lane of the automotive industry. On Thursday, the company announced plans to become publicly traded on the Nasdaq stock exchange and to dramatically expand. The deal is valued at about $827 million.
CarLotz was founded by three local entrepreneurs and opened its first store off Midlothian Turnpike in Chesterfield in 2011. Its second location opened in Henrico County in 2012.
“We are very proud of the fact that we launched and grew this business in Richmond and we call Richmond home,” CEO and co-founder Michael Bor said in an interview Thursday. “We have grown to be a more nationwide business, but it has been through the talent we found in Richmond and the financial and other support we found in Richmond.”
On Thursday, CarLotz announced it will combine with Acamar Partners Acquisition Corp., a publicly traded Miami-based “special purpose acquisition company” that was created and designed to do acquisitions. CarLotz will merge with Acamar and then become publicly traded itself, with shares listed on the Nasdaq under the ticker symbol LOTZ. The deal, which is expected to close by the end of this year, is one of several announced in recent years for companies that got their start in the Richmond area.
In 2019, Powhatan County-based PIEtech Inc., the creator of the MoneyGuide family of financial planning applications, was acquired by Envestnet, a Chicago-based wealth management technology company, in a roughly $500 million deal. In 2018, Richmond-based nutrition bar maker Health Warrior Inc. was acquired by food and beverage behemoth PepsiCo. for an undisclosed amount.
CarLotz now has about 125 employees and eight sites across Virginia, North Carolina, Florida, Illinois and Texas. The deal to take the company public, which still needs to be approved by current investors, will put an estimated $320 million into helping the company expand nationwide.
In the deal with Acamar, “our companies will be able to realize CarLotz’s mission to transform the used vehicle industry in the U.S.,” Bor said on a Thursday conference call with investors. Bor founded CarLotz with Will Boland and Aaron Montgomery, both of whom formerly had executive roles with the company but now serve on its board of directors.
CarLotz is the third major U.S. online car seller to go public this year. Vroom Inc. went public in July, followed by Shift Technologies Inc. earlier this month.
Unlike other online sellers, CarLotz was conceived as a “hybrid” business model — with both a physical and online business presence — and it was always intended to have a potential national market, said George Hoffer, a transportation economist and professor emeritus at Virginia Commonwealth University.
The move to go public and expand nationally is an effort to get ahead of competitors attempting to enter the market, he said.
“That is why they did their homework before they even started,” Hoffer said. “This was not a person with a vacant lot starting a used car lot. This was, right from the beginning, conceived as an idea that really has a national footprint — much like CarMax,” which itself grew from Richmond-area roots into a national powerhouse.
CarLotz made Inc. magazine’s annual list of the nation’s 5,000 fastest-growing private companies in 2018, 2019 and 2020. Most recently, it ranked No. 962 on that list, with three-year revenue growth of 962%.
“Our growth has been very deliberate and very thoughtful,” Bor said on the conference call. “However, our ambition is to deploy our innovative model nationwide, as the untapped demand for our service exists in every region of the United States.”
Bor said the company’s current annual revenue exceeds $100 million, but going public would allow it to expand more quickly with hubs around the country. Hubs are locations where the company receives and reconditions cars offered by its customers for sale.
The deal also will allow CarLotz to invest in technology and marketing to grab a larger share of the $841 billion used automobile market in the U.S.
Bor said the company is projecting 2023 revenue of more than $1 billion, but to reach that goal, it needs more hubs. About 60% of CarLotz’s vehicle inventory comes from corporate partners looking to sell used cars from their fleets.
“It is important for us to have hubs all around the country, near our corporate vehicle sourcing partners who want our locations to be near their inventory,” Bor said.
He said a key part of the strategy is opening three or four new hubs each quarter over the next several years.
“More hubs equate to more inventory to sell, plus we continue to improve inventory turnover and add and elevate services to both sides of our buyer and seller equation that will generate more revenue,” Bor said.
The company said Thursday that a group of investors has agreed to invest $125 million in common stock at $10 per share through a public investment in private equity, or PIPE, deal. They include Fidelity Management & Research Company LLC; KAR Global; McLarty Diversified Holdings; TRP Capital Partners; and Rick Wagoner, the former CEO of General Motors who grew up in the Richmond area and graduated from J.R. Tucker High School.
Existing CarLotz shareholders will roll over most of their existing equity and will retain 59% of the combined company’s pro forma equity.
The total shares outstanding will be 114.8 million. That includes 68 million rollover equity shares from CarLotz existing stockholders, 30.6 million Acamar public shares, 12.5 million shares from the PIPE investment and 3.8 million Acamar sponsor shares. That assumes no redemptions and that all special purpose acquisition company proceeds remain in trust. It excludes the impact of any earn-out shares and warrants.