KAR Auction Services shares inch up after IPO

AP News
Posted: Dec 11, 2009 5:02 PM

Shares of KAR Auction Services Inc. Friday inched above prices set by the vehicle auctioneer in its initial public offering.

KAR raised $300 million Thursday selling 25 million shares for $12 apiece. Shares closed up 3 cents to $12.03 on the New York Stock Exchange.

The Carmel, Ind.-based company's IPO has been a difficult one. KAR initially expected to raise $341 million selling 23 million shares at prices between $15 to $17. But by Thursday it had scaled back those plans.

KAR, which auctions used and salvaged vehicles, has suffered along with the rest of the broader auto industry during the sharp downturn in vehicle sales this year. With fewer people buying new cars, fewer used and salvaged vehicles are coming up for auction.

Analysts said investors are likely wary of KAR's debt. According to recent regulatory filings, it owes creditors $2.5 billion.

The Left-wing Paradise of San Francisco
Rachel Alexander

The company had $1.31 billion in revenue during the first nine months of this year and made a profit of $17.9 million.

Despite its current problems, analysts believe that the market for used vehicles will increase as new auto sales slowly recover.

KAR's offering is underwritten by banks that include Goldman Sachs, BofA Merrill Lynch and JP Morgan.