Vroom [VRM] started trading following its enormously hyped IPO in June 2020. Its shares have now collapsed by 97% from the high in September 2020 and closed today at $2.08, another new all-time low (data via YCharts):
There is a problem lurking on these car lots now. As retail prices are shifting down because consumers have had it and they’re resisting those ridiculous prices, the inventory that was purchased at these ridiculous prices will squeeze per-unit gross profits. CarMax is profitable and has been around the block, and it won’t lead to an existential crisis.
But that cannot be said for Vroom, Carvana, and Shift because they already lost an arm and a leg every year, even during the best of times when the industry overall made the biggest profits ever. But now, they’re facing overpriced inventory, declining retail prices, surging operating costs, and price resistance among potential customers. In addition, just in the nick of time, the Fed is tightening financial conditions for the next few years, which will make it more difficult for money-losing companies to get funding.CarMax Reported, Shares Plunged Further. Shares of Online Used-Car Startups Vroom, Carvana, and Shift Already Collapsed | Wolf Street