Insurance Acquisition Corp. to Combine with Shift Technologies

Insurance acquisition shift

Insurance Acquisition Corp. to Combine with Shift Technologies

Jun 29, 2020 INTEL by Matt Cianci

Insurance Acquisition Corp. (INSU) filed an 8-K on Monday morning announcing they entered into a Definitive Agreement with Shift Technologies, the eCommerce platform dedicated to forging a better used car buying & selling experience.  Shift was founded in 2013 and is only selling in select California and Oregon markets for now, but plans to expand to other cities in the coming years. The transaction gives Shift an implied enterprise value of $415.9M, or 1.0x 2021 revenue. Details below.

  • $185M in PIPE financing with anchor institutional investor
  • $303M cash to Shift balance sheet to fund working capital, growth initiatives
    • 100% of sellers’ equity rolling over
  • Company forecast 2021 EBITDA of -$54M
    • Forecast calls for margins to improve and sales to grow 107% in 2021
  • Margin improvement based on better Gross Profit per Unit (GPU)
    • Improving from $1,300 (2019) to $1,924 (2021)
    • Likely to come through scaling inventory purchases, reconditioning, and fulfillment costs
  • Management will continue to operate the company
    • 6M earn-out shares with hurdles over first 30 months post-close
  • Transaction expected to close by end of third quarter

Quick Takes: So far, Shift Technologies has successfully carved out a niche in the lower-end of the used car market where there is historically little eCommerce penetration and average selling prices are 45% less than Vroom and 10% below Carvana. Shift sees this part of the market holding a higher margin and lower customer acquisition cost (CAC), making it ripe for a “disruptor”. The company is leveraging technology in its app to improve customer transparency on buying and selling used cars through Shift while also keeping the process personalized and convenient by offering test-drives and deliveries at the customer’s location.

On the seller’s side, Shift uses AI to quickly offer a price for the seller’s car and buyers are provided predicted recommendations and loan pre-qualifications to simplify the process. The company also reconditions all of its cars to ensure they pass a 150-point inspection. All transactions and financing take place within the app as well. So far, Shift has executed well while under a regional focus as shown by its Net Promoter Score (NPS) of 70, which is highly correlated to customer retention rates (for comparison Vroom and Carvana have NPS’s of 52 and 82, respectively).


The company is expecting aggressive hockey-stick-like growth in the 2nd half of this year and lasting through 2021, based on improved unit economics coming from:

  1. A reduction in lower margin wholesale units
  2. Launch of their “Value” division focused on cars with >80k miles or >8 years old
  3. Growth in their Finance & Insurance business through bundling with sales.

An EV at 1.0x 2021 revenues puts the transaction below Carvana’s (CVNA) 2.7x and Vroom’s (VRM) 2.7x on an EV to ’21 revenue basis. The street is expecting just 45% and 58% top line growth for CVNA and VRM in 2021, but also narrower EBITDA losses. It would have been nice to see a range for Shift’s revenue estimates in 2020 and 2021 as investors are asked to take guidance around growth expectations at face value for now.


  • The transaction comes at 2.1x 2020 revenue or 1.0x 2021 revenue
  • GPU increasing from $1,300 (2019) to $1,505 (2020) to $1,924 (2021)
    • Expects number of units sold to increase 94% in 2021 to 24,286
  • Expects mix to improve in favor of retail (away from wholesale)
    • Retail portion increasing from 74% of units sold (2019) to 86% (2021)
  • EBITDA expected to remain negative through 2021
  • No guidance on $12.5M term loan

Click here for the investor presentation.


  • Wells Fargo is serving as exclusive financial advisor to Shift and the Sole Placement Agent to Insurance Acquisition Corp.
  • Cantor Fitzgerald, Wells Fargo, William Blair and Northland Capital Markets are acting jointly as Capital Markets Advisors.
  • Jenner & Block is acting as legal advisor to Shift.
  • Morgan, Lewis & Bockius is acting as legal advisor to Insurance Acquisition Corp.
  • The Blueshirt Group is acting as investor relations and public relations advisor to Shift.
  • Latham & Watkins is acting counsel to the Placement Agent for this transaction.
  • O’Melveny & Myers is acting as counsel to Shift’s stockholders.



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