Carlotz’s rough ride as a public company continues.
Scott’s addition-based used-car retailer has been facing speedbumps since the SPAC deal went public in early 2021.
Most notably late, its stock price performance fell to 48 cents per share in the closing hours of Wednesday, January 22, 2021, from an initial list of $ 11.92. That means a decline of 96 per cent in 18 months.
The stock, which trades as LOTZ on the Nasdaq, has fallen below $ 1 per share day since April 25th. That price series prompted a note from Nasdaq earlier this month that warned Carlotz that it should return at least $ 1 per share. Dealing with consecutive business days or stock exchanges by December 5 is expected.
While its stock price decline has coincided with the overall backward stock market in recent months, Carlotz has other market forces, including the ongoing commotion in the used car inventory market due to the lack of supply triggered by the epidemic.
Carlottz was founded in Richmond, allowing customers to ship their used vehicles with Carlottz, with the company maintaining a prepayment and listing for a flat advance fee of $ 199 and an additional fee of $ 699 when the vehicle is sold.
It eventually expanded beyond the consumer market for its inventory and tapped into the used car wholesale market. That sourcing division became a bigger and bigger part of its business, until it was hit hard by an epidemic shortage.
The losses have continued to increase since then. 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 of 2021 over the $ 6.6 million loss in 2020 and $ 12.7 million in 2019.
All the red drew the ire of some unhappy shareholders. At least seven lawsuits have been filed in federal court over the past 12 months against Carlotz and / or many of its executives and directors. All are created as class action cases and make similar claims, alleging that the company violated federal securities law in the months before and after it was listed on the Nasdaq.
The summary of most cases is that Carlotz deliberately misrepresented or omitted important information in her financial statements and public statements. It includes information related to sales and inventory restrictions that coincide with a steady decline in its share price.
Most are filed in New York and the most recent are in Delaware. Due to their similarities in claims and class action aspirations, most of them are integrated into one case.
Among the defendants in some of the lawsuits is Michael Bohr, a longtime Richmond investment banker who founded Carlotz in 2010 with his friends and business partners Aaron Montgomery and Will Boland.
When Montgomery and Boland exited the company ahead of the SPAC IPO, Bore held the helm before being replaced in March of this year. His departure was the first in the company’s restructuring of several C-suite positions.
Bohr, meanwhile, is selling his Carlotz shares in groups.
At the time of the company’s proxy filing in April, Bohr owned 11.68 million shares of Carlotz stock. At the end of Carlotz’s first day on the Nasdaq 18 months ago, those shares were worth approximately $ 139 million. The same shares are valued at approximately $ 5 million based on the current stock price.
But Bore has cut that stake in recent weeks, selling nearly 5 million shares since May, in multiple transactions totaling about $ 2.6 million, at an average share price of about 50 cents, according to the SEC filings.
They now hold a total of 6.71 million shares directly or in the name of family members and family trusts. This amounts to about 6 percent of the company’s 114 million outstanding shares. Bore’s remaining stake is worth approximately $ 3 million, based on Wednesday’s closing price.
The company announced more bad news this week, revealing in a news release that it has closed half of its retail locations nationwide. That’s a reduction of 11-22 percent of the 22 stores it calls “hubs” and 25-30 percent of its employees.
Closures are “part of a business strategy review, as cash protection and future profitable growth are key determinants,” the company said.
“The company is focused on growing the remaining hubs, which, in combination, will produce greater future growth potential, higher profitability and more attractive sourcing opportunities,” it said in a news release.
The closure includes two stores each in Florida, Texas and Illinois, as well as locations in California, Georgia, Alabama, Tennessee and Washington.
Most of those 11 have only been open for a year, and the additional three previously announced but not yet opened stores, the company said. Even if the lease was already signed at those three locations.
Its remaining 11 locations include two in the Richmond area, plus one in Charlottesville; Chesapeake; Los Angeles; Tampa; Denver; Huntsville, Alabama; Downers Grove, Illinois; And Greensboro and Charlotte, North Carolina.
The closure would save $ 12 million to $ 13 million annually, and another $ 8 million if real estate was successfully used, the company said.
The company declined to comment on the story, citing a quiet period in interviews with the press.
Lev Pecker, the newly minted CEO who replaced Bore in March, said in a weekly store closing news release: “Over the past twelve months, our sourcing has been challenged. The priority is to grow a mix of our consumer-based vehicles to complement our retail remarketing sourcing channel and reduce our reliance on auctions.
“We believe the closures will allow us to improve sourcing on a smaller hub base and focus on the productivity and efficiency of the remaining hubs.
CarLotz listed 828 vehicles in its inventory for sale as of Wednesday afternoon.