CarMax rises after activist investor Starboard takes $350 million stake
Online car retailer CarMax is climbing in premarket trading on Wednesday following reports that activist investor Starboard Value has taken a $350 million stake in the company.
Starboard nominated two directors to CarMax’s board, including its own CEO, Jeff Smith, and Frontdoor CEO Bill Cobb.
According to a letter sent by Starboard to CarMax, the hedge fund thinks the company can improve performance by adopting more dynamic pricing, reconditioning vehicles more efficiently, and reducing admin and other costs by more than $300 million.
Per Starboard’s letter: “If the experience is superior, CarMax does not need to be the lowest-priced provider to win. We strongly encourage you to be hyper-focused on the digital end-to-end consumer experience. We believe there is an ample amount of low hanging fruit; so much fruit that it may even be touching the ground.”
CarMax is the largest US used car retailer, but rival Carvana has closed the retail sales gap between the two companies to about 6,000 vehicles as of the two most recent comparable quarters.
According to a letter sent by Starboard to CarMax, the hedge fund thinks the company can improve performance by adopting more dynamic pricing, reconditioning vehicles more efficiently, and reducing admin and other costs by more than $300 million.
Per Starboard’s letter: “If the experience is superior, CarMax does not need to be the lowest-priced provider to win. We strongly encourage you to be hyper-focused on the digital end-to-end consumer experience. We believe there is an ample amount of low hanging fruit; so much fruit that it may even be touching the ground.”
CarMax is the largest US used car retailer, but rival Carvana has closed the retail sales gap between the two companies to about 6,000 vehicles as of the two most recent comparable quarters.
