But the reason AutoNation (AN - Get Report) and TrueCar split may have more to do with accurate payment for TrueCar's services than what was stated, a struggle over TrueCar's demand that AutoNation furnish data about its customers. AutoNation, which has been using TrueCar's services for nearly a decade, declined to provide data other dealer affiliates have agreed to provide.
The value of TrueCar common shares collapsed late Thursday when AutoNation announced it was leaving the fold, losing more than 10% in about half an hour, before recovering slightly. Shares bounced back Friday morning before losing 5% or so again by day's end. The stock recently rose 0.5% to $10.72.
The past year has been a tough one for TrueCar common stock, which has fallen over 53%, compared with a 7% rise in the Nasdaq. The company's initial public offering of common shares in May 2014 raised about $70 million.
TrueCar acts as a middle man between on-line shoppers and dealerships that agree to be its affiliate. TrueCar issues "certificates" that a consumer may use to buy a car when a dealer affiliate agrees to sell one at a specified price. To ensure dealers pay its $300 per vehicle commission, TrueCar asks affiliates to submit sales data about their buyers.
TrueCar's rising profile in automotive marketing has been controversial. The company is facing lawsuits from dealers, shareholders and a trade association over its business practices.
Talks between AutoNation and TrueCar over the latter's contention that it needed customer data to validate proper payment of commissions reached an impasse in May. TrueCar said it has been the agent for about 7% of AutoNation's vehicle sales, a figure AutoNation said was closer to 3%. At issue are shoppers who may hold a certificate from TrueCar while negotiating with a dealership.
Another factor in the breakup is AutoNation's goal of investing about $100 million to reduce outlays on third-party providers of sales leads and build a proprietary digital marketing and buying platform for its 240 dealerships nationwide, announced last year.
Alan Ohnsman, a TrueCar spokesman, said, "We ask that dealers in our network provide a minimal amount of sales transaction data for the sole purpose of sales matching -- verification that customers sent to those dealers from our platform are matched to dealer sales. This is how we are paid." Data is submitted to a third party, he said, which audits it.
An AutoNation spokesman, Marc Cannon, said the company is "seeing more and more customers coming to our site and showroom via Auto Nation Express," its digital platform. Separation from TrueCar, which becomes effective this Wednesday, "isn't expected to hurt our results," he said.
For the year to date AutoNation common shares, currently up 3% at $64, have gained 6% in value, compared with a 1.8% gain in the S&P 500.