Used Car Retailer Shift Goes Public Wednesday, Ready for Quarantine Shoppers
Used car retailer Shift is going public today, and continues its promise to make car shopping a breeze during these here Quarantine Times. But will their not-so-unique (and now public) model make a dent in the market?
Though they’ve been around since 2014, your author hadn’t heard of Shift until this writing. Working on a consignment model, Shift allows you to buy or sell a car through their service and skip the dealership. Much like CarMax, Shift owns the cars it has on sale, has its own process of inspection, takes its own pictures, and is a no-haggle dealer. The prices are fair, they say, because they keep track of actual cars for sale in the marketplace.
Given The Current Year, Shift is selling on safety. You can browse, trade, finance, and complete a purchase online from the comfort of your home. They offer a concierge program for their cars as well (if they’re close enough), where someone will bring a car to you for a no-fee test drive. Speaking of fees, it’s not cheap dealing with Shift. They won’t tell you what they charge on their site, but it was elsewhere online. When you sell your car to Shift the seller pays 8 percent of its assigned value. Later, they’ll charge the buyer of any car a 3.75 percent service fee on the car’s value. Nearly 12 percent on each ride sold. The concierge fee exists on all purchases, test drive or no. Shift says it helps to pay for the inspection, paperwork, and other niceties they provide. Forking over $1,875 so I don’t have to visit a dealer for my used $50,000 BMW sounds a bit steep.
The company has big-name financial backers like Goldman Sachs, BMW, and the Renault-Nissan-Mitsubishi group. Announced in the summer, the company sought (and completed) a reverse merger. A new company was created, Insurance Acquisition Corp, which was created solely to acquire Shift. This special purpose acquisition vehicle (SPAC) will raise $185M of capital by selling shares, and then combine with Shift for a total company value of $730M, per Reuters. It’s an easier way to go public, and avoids lots of regulatory filings because the public company is brand new and essentially a shell for what it’s about to buy. Catch them on the Nasdaq, SFT.
Doing some investigating into Shift, I thought I’d see if there’s a store near me, and what car I might have delivered. With my Ohio ZIP code inputted, Shift showed me they had 1,404 cars. “All local,” I thought, not bad. But no! They have 1,404 cars in their system total. Their site filtered to the closest car to me, a Focus, which was in San Diego. A little more snooping told me Shift’s locations were limited to four places in California, with an additional location in Portland. The company’s site doesn’t say “By the way we service California and Oregon only, Ohio resident,” but they were willing to cover $350 of the cross-country shipping if I bought the Focus then and there without seeing it. Generous!
This IPO is surely a way to expand rapidly. But with the proliferation of “buy without a salesman” car services already in place across the nation (Zoom, Carvana, CarMax), breaking out of 1,400 cars in California may prove challenging. And all those investors will want a quick return.