Carvana IPO Sputters In Its Debut

Carvana, the online marketplace for buying used vehicles, had a weak debut Friday on the New York Stock Exchange, falling more than 17% before it recovered slightly to close at $11.10 a share.

The company did sell all 15 million shares in its offering, raising about $225 million.

CEO Ernie Garcia says he’s not worried.

“I really do believe today’s a great day and I don’t mean to say that just because it’s kind of the line you’re supposed to say,” said Garcia told Fortune. “If you drew a line from four years ago when we were just an idea to today, I think that’s a line with a very steep trajectory. We’re going to continue to build the business that got us that trajectory, and we’re not going to worry too much about what the stock does in between because we feel strongly that as long as we continue to execute everything is going to be fine.”

What Happened

Shares of the Phoenix-based startup, a self-described “Amazon of cars,” opened down 10% at $13.50 a share. The company had priced its IPO at $15, right smack in the middle of its $14 to $16 target price. The debut price put the company’s market value at about $2 billion.

The share price fell as low as $10.70. It closed at $11.10.

What Carvana Does

Carvana lets buyers shop for, finance, buy, and trade in used cars online. It’s a crowded space. But Carvana has tried to differentiate itself by developing—alongside its online business—multi-level glass-and-steel buildings that are described as automated car vending machines. Customers can choose to pick up their purchased vehicle at these “vending machines” or have the vehicle delivered.

Carvana has facilities throughout the U.S. that enable it to offer free, next-day delivery to local residents in 24 markets, including Austin, Atlanta, Dallas, Pittsburgh, and Washington D.C. The company has more than 1,000 employees and is based in Phoenix.

Carvana’s Financials

Carvana has never reported a profit since its inception in 2012. It has seen tremendous growth in revenue.

The company lost $93.1 million in 2016 on $365.1 million in revenue, nearly triple its $130.4 million in sales in the previous year, according to its S-1 regulatory filing with the U.S. Securities and Exchange Commission.

Carvana said in its S-1 IPO filing that it expects the losses to continue in the near term. Prior to filing for an IPO, Carvana raised $460 million in funding.

So why go to the public markets? Garcia says the timing was right.

“We clearly got to a place in the business where we got to execution mode and we needed to open more markets and ramp up sales in markets we were already in,” Garcia said. “It became a much clearer story to tell the public markets. We think public capital is good for the brand.”