8-KSecurities & ListingRegulation FDExhibits & Filings

CARVANA CO. 8-K Report, Unregistered Securities Sale (Apr 17, 2018)

Filed April 17, 2018For Securities:CVNA

Summary

Carvana Co. (CVNA) has filed an 8-K report detailing a significant acquisition and unregistered equity issuance. On April 12, 2018, Carvana Group, LLC, a subsidiary, acquired 100% of Car360, Inc. This strategic move brings Car360's 16-person workforce into the Carvana, LLC subsidiary, likely to enhance Carvana's technological capabilities or operational efficiency. The transaction involved a cash payment of approximately $6.7 million, plus the issuance of 930,047 Carvana Group LLC class A common units, exchangeable for 744,037 shares of Carvana Co. class A common stock. The reported value of these units was approximately $15.2 million, based on a trailing average stock price. The issuance was conducted under Regulation D, Rule 506(b) and Section 4(a)(2) of the Securities Act, exempting it from standard registration requirements.

Key Highlights

  • 1Acquisition of Car360, Inc. by Carvana Group, LLC completed on April 12, 2018.
  • 2Acquisition price included approximately $6.7 million in cash and 930,047 Carvana Group LLC class A common units.
  • 3Issued common units are exchangeable for 744,037 shares of Carvana Co. class A common stock.
  • 4The value of the issued common units was approximately $15.2 million, based on a 60-day trailing average stock price.
  • 5Car360, Inc. brings a workforce of 16 employees into Carvana, LLC.
  • 6The equity issuance was conducted under Regulation D and Section 4(a)(2) exemptions, indicating unregistered securities.
  • 7Company issued a press release on April 17, 2018, to announce the acquisition.

Frequently Asked Questions

While the specific strategic benefits are not detailed, the acquisition of Car360, Inc. and its 16-person workforce likely aims to enhance Carvana's technological capabilities, data analytics, or operational efficiency, given Carvana's focus on innovation in the online used car market.

The issuance of Carvana Group LLC common units was made in reliance on exemptions from registration under Regulation D, Rule 506(b) and Section 4(a)(2) of the Securities Act. This is a common practice for acquisitions where the target company's stockholders are sophisticated investors or the transaction is considered a private placement, avoiding the time and expense of a full registration statement.

The acquisition involves the issuance of new equity, which could potentially dilute existing shareholders' ownership. The value of the issued units was pegged to the Company's class A common stock price, indicating the acquisition was structured to align with market valuations. The long-term impact will depend on how effectively Carvana integrates Car360's assets and workforce to drive future growth and profitability.

The report mentions that the cash portion of the acquisition price is subject to certain post-closing adjustments based on expenses and working capital of Car360, Inc. This is a standard practice in M&A to ensure the purchase price accurately reflects the target company's financial health at the closing date.