SCHEDULE: Carvana Amends Root Stake Disclosure

Carvana Group, LLC updated its beneficial ownership in Root, Inc., now holding 36.9% of Class A common stock, primarily due to a change in Root's outstanding share count.

Summary

• Carvana Group, LLC, along with Carvana Co. Sub LLC and Carvana Co., beneficially owns 7,952,386 shares of Root, Inc. Class A Common Stock.
• This represents approximately 36.9% of Root's outstanding Class A Common Stock, based on Root's reported shares as of July 30, 2025.
• On a fully-diluted and as-converted basis, this aggregate amount represents approximately 34.0% of Root's total Common Stock.
• The holdings comprise 780,727 shares convertible from 14,053,096 shares of Preferred Stock and 7,171,659 shares from exercisable warrants.
• The amendment reflects a change in percentage ownership solely due to a change in Root, Inc.'s outstanding Class A Common Stock as reported in its Quarterly Report on Form 10-Q filed on August 6, 2025.

Sentiment

Score: 6

Explanation: The filing is a routine update to beneficial ownership, reflecting a change in the issuer's outstanding shares rather than a new transaction by the reporting person. The continued holding of a significant stake and the exercisability of warrants based on prior milestones are mildly positive, indicating the strategic partnership is progressing as planned. No new negative information is disclosed.

Positives

• Continued strategic investment by Carvana in Root, Inc., indicating an ongoing partnership and potential for integrated services.
• Three tranches of warrants (Tranche 1, 2, and 3) representing 7,171,659 shares have become exercisable, indicating the achievement of specific milestones related to the integrated automobile insurance solution and insurance sales metrics through Carvana's Integrated Platform.

Risks

• The value of the preferred stock and warrants is subject to the performance of Root, Inc.'s Class A Common Stock.
• The exercise of the remaining five tranches of warrants is contingent on achieving additional defined milestones tied to insurance sales through the Integrated Platform, which may not be met.
• The short-term warrants expire on September 1, 2025, and long-term warrants expire on September 1, 2027, posing a time-sensitive risk if not exercised or if the stock price is below the exercise price.

Future Outlook

The filing does not provide explicit forward-looking statements or guidance from management regarding Root, Inc.'s future performance or strategic direction, beyond the conditions for warrant exercisability.

Industry Context

This filing highlights the ongoing strategic relationship between Carvana, an online used car retailer, and Root, Inc., an insurance technology company. Carvana's significant stake and the conditions for warrant exercisability underscore the importance of integrating insurance solutions into the online car buying process, a trend aimed at offering a more seamless customer experience and potentially increasing revenue streams for both companies in the automotive and insurance technology sectors.

Comparison to Industry Standards

• The substantial beneficial ownership of 36.9% by Carvana in Root, Inc. is a significant strategic stake, indicating a deep partnership rather than a typical portfolio investment. This level of ownership is comparable to strategic alliances or joint ventures seen in other industries where a larger company invests heavily in a smaller, complementary technology provider to integrate services.
• The structure involving preferred stock and performance-based warrants (tied to insurance sales metrics through an integrated platform) is a common mechanism for strategic investors to align incentives and ensure the achievement of specific business development milestones, similar to partnerships between fintech companies and traditional banks or e-commerce platforms and logistics providers.
• The specific exercise prices of the warrants ($180.00 to $540.00, adjusted for a 1-for-18 reverse stock split) reflect the valuation expectations at the time of the original agreement, which can be compared to similar strategic investments in high-growth tech companies where future performance triggers additional equity upside.

Related Party Transactions

• The filing details Carvana Group, LLC's beneficial ownership in Root, Inc., which stems from a strategic investment involving preferred stock and warrants. This relationship implies ongoing dealings related to the integrated automobile insurance solution for Carvana's online car buying platform.

Stakeholder Impact

• Shareholders (Root, Inc.): The significant and stable beneficial ownership by Carvana indicates a strong strategic partner, which could be viewed positively for long-term stability and strategic direction. The dilution from potential warrant exercises is already factored into the fully diluted percentage.
• Shareholders (Carvana): The continued strategic investment in Root, Inc. suggests Carvana's commitment to its integrated insurance platform, potentially enhancing its service offerings and customer value proposition.
• Customers (Carvana): The integration of Root's insurance solution into Carvana's platform aims to provide a more seamless and comprehensive car buying experience.
• Employees (Root, Inc.): The ongoing partnership with a major player like Carvana provides stability and strategic direction for Root's operations.

Next Steps

• Expiration of short-term Warrants on September 1, 2025.
• Expiration of long-term Warrants on September 1, 2027.
• Achievement of additional defined milestones tied to insurance sales through the Integrated Platform for the remaining five tranches of warrants to become exercisable.

Key Dates

Recommendation

This filing is an amendment to a Schedule 13D, primarily updating the reported percentage of beneficial ownership due to a change in the issuer's outstanding share count, not a new investment or divestment by Carvana. It confirms Carvana's continued significant strategic stake in Root, Inc. and the ongoing progress of their integrated insurance platform, as evidenced by the exercisability of certain warrants. There are no new material positive or negative developments that would warrant a change in investment thesis based solely on this filing. The strategic partnership remains intact, and the implications for both companies are consistent with prior disclosures. Therefore, a 'hold' recommendation is appropriate as the filing does not present new information to alter an existing investment stance.

Keywords

Root Inc, Carvana, Schedule 13D, Beneficial Ownership, Preferred Stock, Warrants, Insurance, Automotive, Financial Services, SEC Filing