CarLotz Inc., a Richmond used car company that’s struggled amid a tricky market, said Friday it closed its all-stock merger with San Francisco’s Shift Technologies Inc. (NASDAQ: SFT).
Shift also works in used car sales, but through e-commerce on the West Coast. CarLotz started as a local startup and sells used vehicles on a consignment as opposed to a commission model. It primarily operates in the Mid-Atlantic after scaling back its brick-and-mortar operations in June in what it billed at the time as a cash-saving move. It indicated plans to shutter three more locations this month, according to Securities and Exchange Commission filings.
CarLotz shareholders received 0.705 shares of Shift common stock for each CarLotz share they own, the companies said. That translates to an aggregate of 84.4 million Shift common stock shares. The combined company will be headquartered in San Francisco and trade on the Nasdaq under Shift’s ticker symbol, “SFT.” The companies said in August when the merger was announced they expected to have a combined cash position of $125 million after the deal closed. Shift’s equity holders were expected to own about 52.9% of the combined company, while CarLotz’s equity holders will own roughly 47.1%.
CarLotz board members Kimberly Sheehy, James Skinner and Luis Ignacio Solorzano, the CarLotz chairman, are joining the Shift board, while Jason Krikorian and Manish Patel have resigned from their board positions.
“We look forward to combining the best assets from both companies to create a leading destination for used auto retail, allowing consumers to shop and buy cars seamlessly however they prefer, online or in-store,” Shift CEO Jeff Clementz said in a statement.
The California company said in August the deal is estimated to provide $75 million of incremental capital needed to break even and expects to reach profitability by 2024. It posted a $75.81 million loss in the third quarter on $161.86 million in revenue. So far in 2022, its share price has fallen 93.32% to 25 cents in Wednesday afternoon trading.
CarLotz reported a $24.29 million loss during the second quarter, up from a $3.47 million loss in the third quarter of 2021. Revenues were $50.84 million for the third quarter, down from $68.04 million in the same quarter of last year. CarLotz’s annual losses by the end of the third quarter had stretched to more than $84 million.
The market for used cars has faced rising demand but low inventory; price indices for used cars jumped 40% last year, and new car sales remain mired in delays created by supply-chain and labor issues stemming from the Covid-19 pandemic. That threw off CarLotz’s business model.
Founding CEO Michael Bor left in March and was replaced by Lev Peker, formerly the CEO of Los Angeles automotive parts seller CarParts.com. There have been several other changes in the C-Suite this year. The company went public via a SPAC merger in late 2021.
It was unclear if Peker has a role in the merged company.
