CarLotz’s rough ride as a public company continues.
The Scott’s Addition-based used-car consignment retailer has faced a bevy of speedbumps since going public through a SPAC deal in early 2021.
Most noticeable of late is the performance of its stock price, which has plummeted from a high at its initial listing of $11.92 on Jan. 22, 2021, to 48 cents per share at the closing bell on Wednesday. That’s a 96 percent decline in 18 months. Its market cap is now at approximately $55 million, down from $1.3 billion at the time of the IPO.
The stock, which trades as LOTZ on Nasdaq, has closed below $1 per share each business day since April 25. That pricing streak prompted a notice earlier this month from Nasdaq, warning CarLotz that it must get back above $1 per share for at least 10 consecutive business days by Dec. 5 or face a delisting from the stock exchange.
While its share price decline has coincided with an overall lagging stock market in recent months, CarLotz has had other market forces to deal with, including ongoing tumult in much of the used car inventory market due to supply shortages triggered by the pandemic.
CarLotz was founded in Richmond on the idea of letting consumers consign their used vehicles, with the company handling the prepping and listing for a flat upfront fee of $199, and an added fee of $699 when the vehicle sold.
It eventually expanded beyond the consumer market for its inventory and tapped into the used car wholesale market. That sourcing segment became a larger and larger portion of its business, until it was hit hard by pandemic shortages.
Losses have since continued to mount. CarLotz posted a $24.8 million loss in the first quarter of 2022, worse than its $15 million loss in the same period last year. That’s after losing $39.9 million for the full year 2021, on top of a $6.6 million loss in 2020 and a $12.7 million loss in 2019.
All that red has drawn the ire of certain disgruntled shareholders. At least seven lawsuits have been filed in federal court in the last 12 months against CarLotz and/or many of its executives and directors. All are structured as class action cases and make similar claims, alleging the company violated federal securities laws in the months leading up to and since its listing on Nasdaq.
The gist of most of the cases is that CarLotz knowingly misstated or omitted important information in documents and public statements related to its financial state. That includes information related to sales and inventory constraints that have since coincided with a steady decline in its share price.
Most have been filed in New York and the most recent was filed in Delaware. Most of them have been consolidated into one case due to their similarities in claims and class action aspirations.
Among the defendants in some of the lawsuits is Michael Bor, a longtime Richmond investment banker who founded CarLotz with his friends and business partners Aaron Montgomery and Will Boland in 2010.
While Montgomery and Boland departed from the company prior to the SPAC IPO, Bor stayed at the helm through March of this year, before being replaced. His departure was the first in a reshuffling of several of the company’s C-suite positions.
Bor, meanwhile, has since been selling his CarLotz shares in droves.
Bor owned 11.68 million shares of CarLotz stock as of the time of the company’s proxy filing in April. Those shares were worth roughly $139 million at the closing of CarLotz’s first day on Nasdaq 18 months ago, however, his role as CEO at the time prevented him from selling large amounts of shares. Those same shares are now worth around $5 million based on the current stock price.
Now free from any employment agreements, Bor has slashed his stake in CarLotz in recent weeks. Since May he has sold off nearly 5 million shares in multiple transactions totaling approximately $2.6 million at an average share price of around 50 cents, according to SEC filings.
He now owns a total of 6.71 million shares held by him directly or in the names of family members and family trusts. That amounts to nearly 6 percent of the company’s 114 million outstanding shares. His remaining stake is worth roughly $3 million based on Wednesday’s closing price.
The company announced more bad news this week, disclosing in a news release the closure of half of its retail locations nationwide. That’s a slashing of 11 out of 22 stores, which it calls “hubs,” and 25-30 percent of its employees.
The company said the closures are “part of a strategic review of the business, with cash preservation and future profitable growth as key determining factors.”
“The company will focus on growing the remaining hubs which it believes will produce, in combination, the highest future growth potential, highest profit potential, and the most attractive sourcing opportunities,” it said in the news release.
The closures consist of two stores each in Florida, Texas and Illinois, as well as spots in California, Georgia, Alabama, Tennessee and Washington state.
Most of those 11 had barely been open a year, and the company said an additional three previously announced but yet-to-open stores will not open. That’s despite having already signed leases on those three spots.
Its remaining 11 locations consist of two in the Richmond area, along with others in Charlottesville; Chesapeake; Los Angeles; Tampa; Denver; Huntsville, Alabama; Downers Grove, Illinois; and Greensboro and Charlotte, North Carolina.
The company said the closures should result in cost savings of $12 million to $13 million annually and potentially another $8 million if it can successfully sublease the real estate.
The company declined to comment for this story, citing a quiet period on interviews with the press.
Newly minted CEO Lev Peker, who replaced Bor in March, said in this week’s store closure news release: “Over the last twelve months, our sourcing has been challenged. Growing our mix of consumer sourced vehicles is a priority to complement our retail remarketing sourcing channel and reduce our reliance on auctions.
“We believe the closures should allow us to improve sourcing across a smaller hub base and focus on the productivity and efficiency of the remaining hubs. We also believe this is the first step to building a stronger CarLotz, enhancing cash preservation, and creating a path to profitability,” Peker added.
CarLotz listed 828 vehicles in its inventory for sale as of Wednesday afternoon.