The struggling Santa Monica-based TrueCar, which operates the nation's fourth largest online automotive marketplace, is ripe for an acquisition as soon as the end of next month, according to a new research note from the global financial services firm BTIG.
"Based on our inbound call volume, we believe many investors are wondering if TRUE is now an acquisition target," wrote analyst Marvin Fong.
BTIG says the answer is a strong maybe, given that TrueCar has several attributes of an appealing takeover target, including an empty CEO seat, a small group of big shareholders who own a considerable number of shares, and an attractive set of data on shoppers that would be useful to bigger companies.
BTIG thinks a takeover could happen in the next few weeks because TrueCar's board has said it expects to name a permanent CEO by March 31, which the bank believes would be seen as a sign the company is not for sale. Even if a deal does not happen soon, BTIG puts the odds at better than 50/50 that TrueCar is not a standalone company within the next 36-48 months.
"We see the merits of this idea as the overall listings space is stagnant and cost synergies could be meaningful, making consolidation a potentially value accretive route," Fong wrote.
TrueCar has been on a wild ride since serial entrepreneur Scott Painter founded the company in 2004.
It quickly became one of L.A.'s hottest startups after it appeared to be able to disrupt the half-century-plus relationship between consumers and auto dealerships. But dealerships were not about to go quietly, and in 2012, thousands of dealers exited the TrueCar network amidst complaints about bidding wars that meant they were losing money on transactions.
Still, the company went public two years later and shares have gone from a high of $25.00 to under $3 a share this week.
Michael Darrow has served as TrueCar's interim President and CEO since Chip Perry stepped down in June. Perry had been in the post since the end of 2015, when Painter departed.
In 2018, changes to Google's search algorithm caused a steep decline in TrueCar's website traffic. Just as the company was recovering from that and improving its SEO, USAA recently announced it would end its lucrative partnership, which brought in 29% of TrueCar's unit sales, in October.
USAA remains TrueCar's fourth-largest shareholder with about 9 million shares, which represents 8.5% of the stock.