Car-shopping company TrueCar.com plans initial public stock offering
TrueCar.com, the Internet car-shopping company backed by Microsoft Corp. co-founder Paul Allen and insurance giant USAA, plans an initial public stock offering.
The Santa Monica company has grown rapidly over the last year by offering a platform for car shoppers to get an “upfront” price from dealers, thereby avoiding most of the haggling that occurs in auto shopping.
TrueCar’s revenue jumped 68% last year from 2012, to just under $134 million, but the company has never been profitable. Its losses shrank to $25.1 million last year, from $74.5 million, according to offering documents filed with the U.S. Securities and Exchange Commission on Friday.
The filing said TrueCar plans to raise $125 million to invest back into the company, but that the figure could change.
Car dealers pay TrueCar a fee for each sale. Much of its business comes from running the shopping services of the United Services Automobile Assn., Consumer Reports, financial institutions and large employers such as Boeing and Verizon.
Its major competitors include AutoTrader.com, eBay Motors, Edmunds.com, KBB.com, Autobytel.com and Cars.com.
Scott Painter, the company’s chief executive, previously told The Times that the company serves as an important link between consumers and dealers that makes the car-shopping process easier. Last year, TrueCar paid Painter $6.5 million in salary, bonuses, stock and other forms of compensation, according to the filing.
TrueCar provides consumers with data on what other shoppers have paid for a make and model of car in their area. Dealers use the market pricing information to post prices on the website, typically at a discount from manufacturers’ suggested pricing. The transaction saves consumers money and supplies dealers with a steady stream of committed buyers.
TrueCar said it has about 7,000 new-car dealers in its network, and accounts for about 2% of U.S. auto sales.
Previously, some dealers and dealer groups complained that the TrueCar model drives down transaction prices and hurts their profits. They argued to regulators in multiple states that TrueCar violated rules that prohibit the brokering of motor vehicles or the making of “bird-dog” payments by dealers to third parties.
Such actions forced TrueCar to suspend sales in some states and contributed to large losses in 2012. TrueCar said in the offering document that it has worked with regulators and dealers to resolve the claims.
But it still faces an investigation by Oregon officials into whether TrueCar’s sales model violates the state’s business trade laws.
“We are cooperating with the Oregon Department of Justice in an effort to reach consensual resolution of the issues raised by the Oregon Inquiry without making material, unfavorable adjustments to our business practices or user experience in Oregon. We cannot assure you that these efforts will be successful,” the company said.
TrueCar’s major investors include USAA, venture funds such as Capricorn Investment Group, Upfront Ventures and Painter. Allen’s Vulcan Capital invested $30 million in the company in December.
ALSO:
U.S. orders rear cameras for cars
Toyota admits to deceiving consumers, regulators
Federal bailout, bankruptcy lets GM escape liability in fatal crashes
Follow me on Twitter (@LATimesJerry), Facebook and Google+.
