CarGurus unexpectedly delayed reporting its second-quarter earnings on Thursday, sending the vehicle listing company’s stock plunging after it issued a statement that offered few details behind the decision.
Shares of CarGurus slipped 16 percent to close at $18.09 on Friday.
CarGurus, of Cambridge, Mass., had been scheduled to release financial details and hold its quarterly earnings call Thursday after the markets closed. Not long before, it issued a brief statement about the delay.
“CarGurus has not completed its customary quarterly closing and review procedures for the three months ended June 30, 2023,” the statement read. “CarGurus will announce the date of the rescheduled earnings release and conference call in a subsequent press release.”
A spokesperson told Automotive News on Friday that CarGurus would not comment beyond the issued statement.
Public companies, depending on their size, typically have 40 to 45 days to file earnings disclosures based on U.S. Securities and Exchange Commission rules, according to Erik Gordon, an expert on corporate governance and public company securities law at the University of Michigan Ross School of Business.
Gordon said companies late with their earnings filings risk drawing attention from federal regulators the longer they take. The Nasdaq, where CarGurus is traded, also could delist companies that face long filing delays, he said.
“There are serious regulatory consequences,” Gordon said.
Beyond that, Gordon added, companies risk losing investor confidence.
“If you have a loss, you’re just reporting another loss, and the market was probably anticipating that,” Gordon said. “When you can’t report on time, it’s something beyond you having a loss. You have something probably in your financial reporting or control system that prevented you filing on time.”
Although uncertainty about CarGurus’ second quarter continues, its first-quarter results offered a mixed picture about its operations.
Net income tumbled 37 percent to $11.9 million as its digital wholesale division revenue plunged 76 percent from a year earlier. CarOffer, CarGurus’ wholesale digital trading platform and a big part of digital wholesale, ended up facing a worsening loss in the first quarter, but CEO Jason Trevisan insisted this year that CarOffer had turned a corner along with overall operations. CarGurus acquired a 51 percent interest in CarOffer in 2021.
“While we recently faced operational challenges with our CarOffer business, progress this quarter demonstrates our agility in responding promptly and effectively to navigate the year ahead,” Trevisan said during the company’s first-quarter earnings call.