VRM - Vroom

[Broeb22]

Hey all, I might get my hand slapped for discussing another pre-IPO company, but I think Vroom is the kind of business I can understand that solves a need for customers and could be operated more efficiently than hundreds of brick and mortar stores.

 

For those who don't know what they do, they are an online-only used car platform a la Carvana, and they also compete with Carmax.

 

Carmax for reference does $17 billion per year in used car sales (ex-Wholesale), about 3-4% of the $480 billion used car industry, and they're the 800-lb gorilla.

 

I wanted to start a conversation here because I think the business has an interesting opportunity and does not have the governance concerns CVNA has with controlling stock, a majority owner with a criminal record, and significant related party transactions via the VRCs. The leadership at VRM also seems decent given Hennessy's experience building Priceline.com years ago.

 

I don't know that valuation will be where I want it to be coming out of the gate. At the IPO price of $2.2 billion in valuation, its interesting, but if it screams higher and probably doubles on the first day of trading, then that really hurts. Based on where CVNA trades currently a P/S basis, a huge jump seems like almost a base case at this point for VRM. But CVNA fell a lot during the recent downturn and while I was prioritizing profitable companies with good balance sheets during this recent downturn, I might convince myself to take a shot on VRM if a similar downturn happened again in the future. 

[Guest roark33]

One big question is whether VRM is a retailer of cars or a lender.  CVNA acts like a retailer, but it really a high-interest lender.  The business models come with different risks and different profit profiles.  I think that is the question one needs to consider.