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Key Takeaways
- Vroom said it plans to discontinue its e-commerce business and wind down its used vehicle dealership.
- The company said it has been unable to raise the necessary capital to fund its e-commerce operations.
- The stock traded sharply lower following the news and could break down below a falling wedge pattern to a new all-time low.
Vroom, Inc.
Source: TradingView.com
Shares of vehicle e-commerce platform Vroom (VRM) plunged over 50% ahead of the opening bell Tuesday after the company said it plans to discontinue its e-commerce operations and wind down its used vehicle dealership business to shore-up its liquidity and maximize stakeholder value.
The company attempted to raise funds for its e-commerce business in recent months, but said it’s been unable to secure sufficient capital in the current market conditions. “As we previously disclosed, we intended to raise additional capital to fund our operations and support the extension of our vehicle floorplan facility beyond its current expiration date of March 31, 2024. Despite significant efforts to do so, we ultimately were unable to raise the necessary capital in the current market,” Vroom CEO Thomas Shortt said in a statement, adding “obviously, we are very disappointed with this outcome.”
The company said it plans to continue operating its vehicle financing business, United Auto Credit Corporation (UACC), along with CarStory, its analytics service powered by artificial intelligence for automotive retail. In addition, Vroom said it intends to sell its used cars through wholesale channels, halt purchases of additional vehicles, and reduce its workforce to meet its scaled-back operations.
Despite Vroom shares bouncing 20% from the lower trendline of a falling wedge in Monday’s trading session, the stock could be poised to fall well below the pattern to all all-time low today after the company’s announcement. A volume-backed close near the low of the day could signal further selling ahead, while a strong intraday reversal could shift sentiment surrounding the stock.
Vroom shares have fallen 44% over the past 12 months and are down over 12% since the start of the year.
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