The move had the practical effect of making Lithia stock available to certain institutional investors that categorically exclude companies with significantly disparate voting rights.
It also sends a signal to the market about the company’s commitment to stockholder satisfaction — truly outgrowing its roots as a family company.
“Now investors don’t believe this is just a family business,” said Alan Haig, president of buy-sell advisory firm Haig Partners in Fort Lauderdale, Fla. “This is a professionally run organization that’s operating in the interests of all shareholders.”
Institutions have become major holders of Lithia stock. As of March 31, Lithia said, Sid DeBoer owned about 1 percent of the common stock, and Bryan DeBoer had almost 1 percent, according to filings. By contrast, three big institutions — BlackRock, Vanguard Group and Abrams Capital Management — owned almost 30 percent among them.
Since Bryan DeBoer took the helm in 2012, Lithia’s market capitalization has climbed much faster than that of its peers. Haig described those rivals as having been more conservative on acquisitions.
Lithia’s rising stock has also helped pay for its growth. The company sold stock and debt in October, raising $1.33 billion that it then used for acquisitions.
Lithia’s market capitalization more than tripled since the dealership group launched the five-year plan last July to $10.51 billion.
Comparatively, AutoNation Inc., the largest U.S. new-vehicle dealership group, has a market capitalization of $7.62 billion. Penske Automotive Group, the second-largest dealership group last year, was valued at $7.16 billion. Both of those groups’ stocks have more than doubled in the past year while Lithia’s more than tripled.
“Investors are eating up the Lithia strategy, the ramped acquisition pace, technology on top of the acquisitions,” said equity analyst Rick Nelson with Stephens. “At the end of the day, it’s all about execution.”
