U.S. used-auto retailer Carvana LLC, which allows customers to pick up cars they buy on the internet from vending machine-like towers, has tapped investment banks for an initial public offering, according to people familiar with the matter.
The move comes as more consumers become comfortable with online used-car purchases. TrueCar Inc (TRUE.O), for example, a car-shopping service that matches buyers with dealers online, has seen its shares rise 150 percent in the last 12 months.
Carvana has hired Wells Fargo & Co (WFC.N) and Bank of America Corp (BAC.N) to lead its IPO, the people said this week.
The Phoenix, Arizona-based company hopes to go public in the first half of the year at a valuation of well over $2 billion, the people added.
The sources asked not to be identified because the matter is confidential. Carvana declined to comment. Wells Fargo and Bank of America did not respond to requests for comment.
Demand for cars, sport utility vehicles and pickup trucks has remained robust among U.S. consumers, even as it dipped slightly in February to an annualized pace of 17.6 million vehicles, compared with 17.7 million a year earlier, according to Autodata Corp.
Carvana sells cars through its website and operates automated towers that store cars in U.S. cities such as Austin and Dallas in Texas, and Nashville, Tennessee.
Customers can purchase cars online and either have them delivered or pick them up from the ‘vending machine’ towers using a special coin. Carvana also provides auto financing for customers making purchases.
The company reported revenue of $140 million in 2015, and projected revenue of more than $350 million in 2016. It is not yet profitable, according to one of the sources.
Founded in 2013, Carvana is one of a handful of companies trying to disrupt how cars are traditionally bought in dealerships and take on Carmax Inc (KMX.N), the largest used-car retailer in the United States.
The road has not been always been smooth for new entrants to the car retail market. One of Carvana’s competitors, the online car marketplace Beepi, went out of business earlier this year.
Ally Financial Inc (ALLY.N) announced in January it would finance up to $600 million of Carvana’s customers’ loans. Carvana also said last August that it closed a $160 million funding round, bringing the total it has raised to nearly $500 million.
One of Carvana’s backers is DriveTime Automotive Group, a network of used-car dealerships and car refurbishment centers.
(Reporting by Liana B. Baker in San Francisco; Editing by Bernadette Baum)