Shareholders in CarLotz (NASDAQ:LOTZ) and LOTZ stock have had a rough go of it lately. And that’s putting it nicely.
Since going public on Jan. 22 via a reverse SPAC merger, CarLotz has been on a rather linear decline. Shares now trade around $4.50, good for a decline of more than 50% from the company’s IPO price a few months ago.
There are a number of reasons for this decline. Broadly speaking, sentiment for companies that have gone public, or are going to go public, via SPAC mergers has waned. Investors are pricing in smaller premiums than at the end of 2020, and are being pickier with which companies they place their growth bets on.
That said, CarLotz has its own idiosyncratic risks its dealing with right now. The used consignment auto reseller is seeing investor demand for its stock wane significantly. Today, LOTZ stock is down more than 15% at the time of writing, on heavy volume.
Let’s dive into what’s driving this decrease today.
Form 8-K Filing Casts a Shadow of Doubt on LOTZ Stock
CarLotz released an updated Form 8-K and a press release discussing the key updates for investors. It wasn’t pretty.
The company announced that CarLotz’ profit-sharing corporate vehicle-sourcing partner would be pausing consignments to the company. In an already-tight market for used vehicles, this sort of disruption is not being welcomed by investors. This vehicle sourcing partner accounted for more than 60% of the cars sold by CarLotz this past quarter.
The company did clarify that moving forward, it has contingency plans in place. It’s already been moving toward alternative channels to source vehicles. However, CarLotz did acknowledge that this announcement would have negative impacts on the company’s forward-looking revenue and growth estimates.
Additionally, CarLotz announced it would be taking it slower than initially planned with launching new hubs. The company initially planned on 14 to 16 hub openings in 2021. While the company appears to remain firm on this commitment, the timing of when these hubs will open is up in the air. Accordingly, the company issued a warning against previous forward guidance numbers.
These announcements are certainly bearish for this stock. The company’s updated forward guidance is being priced into this stock as we speak. However, whether more downside with this stock remains to be seen is the key question on the minds of investors in LOTZ stock today.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.