(Reuters) - Shares of Carvana Co (CVNA.N), which uses vending machine-like towers to sell used cars, plunged as much as 17 percent in their market debut on Friday.
The company’s shares, which were priced at $15, opened at $13.50, giving the company a market value of about $2 billion. The shares fell 16.6 percent at $12.50.
Phoenix-based Carvana sells cars through its website and allows customers to pick them up from automated “vending machine” towers located in U.S. cities including Austin and Dallas in Texas, and Nashville, Tennessee.
“We’re going to stay focused on what we can control, which is our business and the huge opportunity ahead,” said Carvana’s chief executive, Ernie Garcia, when asked about the weak stock debut.
The company’s IPO comes amid mounting evidence that the six-year recovery in the U.S. auto industry may be losing steam.
Industry officials and Wall Street analysts have raised concerns that values for used sedans were dropping as more vehicles were turned in when leases ended.
Founded in 2013, Carvana is one of a handful of companies trying to disrupt how cars are traditionally bought in dealerships and to take on Carmax Inc (KMX.N), the largest used-car retailer in the United States. CarGurus, another popular website where consumers go to browse cars, has tapped investment banks for an initial public offering later this year.
Carvana stands to benefit from consumers’ increasing comfort to buy vehicles online and the fact that car dealerships remain “largely unchanged,” Garcia said.
TrueCar Inc (TRUE.O), an online service that matches car buyers with dealers, has seen its shares nearly double since its market debut in May 2014.
Carvana’s sales surged nine-fold in 2014, more than tripled in 2015, and nearly tripled in 2016 to $365.1 million. However, the company’s net loss widened to $93.1 million in 2016 from $36.8 million in 2015 as it invested heavily in growth.
The company sold all the 15 million shares in the offering, raising about $225 million.
Carvana is backed by DriveTime Automotive Group, a network of used-car dealerships and car refurbishment centers.
Wells Fargo, Citigroup and Deutsche Bank Securities were the underwriters for the offering.
Reporting by Diptendu Lahiri in Bengaluru and Liana B. Baker in San Francisco; Editing by Sriraj Kalluvila and Leslie Adler