DON'T DO IT!
Sure, on the surface, it might sound like a good idea, and maybe in the short term it would be, but there are just to many negatives and things that could go wrong with this new initial public offering.
For one thing, the economy is still basically a shambles, and credit markets are just to unstable to justify the risk. If people cannot get a loan, they won't be able to buy a car, even at auction, and most cars at auctions are bought by used car dealers anyway, and if their sources of credit dry up (and they have been), how will the average person be able to get the kind of money needed?
I'm sure some of you might be saying "Well, they can still pay cash to get the car at auction". True, but how many people have that kind of cash lying around? Enough to sustain a business model?
In the research I've done into the company, and that includes reading the prospectus (and I thought "Moby Dick" was a boring read) and everything I could find out on the internet, the income stream is to unstable. During this year's third quarter, KAR had a profit of $8.6 million, and while that does sound like a lot, last year they had a net loss of $169.9 million, and most of the profits they made were from cost and expense cutting, because sales were down 3.3%.
Another reason I won't be investing in this stock (let alone speculating) is that the bulk of money they plan to raise from the stock offering won't be going to expand the business but to pay down the company's debt.
Sorry, but this is just to risky for me. I would rather lose out on 99 fantastic investments rather than make one lousy investment.
If I come across one I think would be good for you, my readers (yeah, right) I'll keep you informed.
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