Online used car seller Vroom is the latest startup to find that investors have an insatiable appetite for new stocks. Vroom shares debuted on Wall Street Tuesday and quickly more than doubled from their offering price.
Vroom, which competes with traditional used car sellers such as AutoNation (AN) and CarMax (KMX) as well as internet car dealer Carvana (CVNA), priced its stock sale at $22 a share — above its expected range. The stock wound up soaring 118% to finish the day at $47.90.
The company has impressive financial backers. Vroom’s top investors include venture capital firm General Catalyst Group, mutual fund company T. Rowe Price (TROW) and Cascade investment, a firm controlled by Microsoft (MSFT) co-founder Bill Gates. AutoNation also owns a nearly 5% stake in Vroom.
Vroom CEO Paul Hennessy will talk more about the company’s plans now that it has gone public on the CNN Business “Markets Now” show Wednesday at 12:45 ET.
The surge for Vroom’s stock follows healthy gains for several other initial public offerings in recent weeks, including record label Warner Music Group, business data software company ZoomInfo and biotech company Pliant Therapeutics.
Several other high-profile companies have also debuted on Wall Street in the past year thanks to mergers with so-called special purpose acquisition companies, blank-check firms that exist for the purpose of being acquired by a private company.
Richard Branson’s Virgin Galactic (SPCE), online gambling and fantasy sports site DraftKings and electric-truck company Nikola have all done deals with these special acquisition companies in order to go public.
Vroom, like many newly public companies, has reported strong sales growth compared with a year ago. The solid debuts for Vroom, ZoomInfo and others are further signs of the strength in the stock market.
This could lead other private companies, including so-called unicorns like Airbnb, DoorDash and Robinhood to reconsider the idea of going public this year.