Used car dealer Cazoo seeks lifeline to avoid bankruptcy

Cazoo founder Alex Chesterman will step down as the company's CEO in 2023. Photo: Tom Stockill

Just a few days later, however, Cazoo stunned the stock market with a bombshell announcement that it was facing a financial crisis.

The company warned it faces a funding shortfall in the first six months of 2024 if it fails to raise additional capital. The company said it expects to end the year with cash of between £100m and £115m and an additional £20m to £30m of vehicles on hand.

However, the company warned it was burning through between £30 million and £40 million each quarter and restrictions on its credit agreements meant it would have to maintain a cash cushion of £50 million from the start of the year.

“If we are unable to obtain adequate financing… our ability to continue as a going concern… may be materially limited, which could have a material adverse effect on our business, financial condition, results of operations and prospects,” it said in a filing with U.S. regulators.

Cazoo's Wall Street listing valued the company at $8 billion, catapulting Chesterman into the ranks of the super-rich and providing big paydays for other key backers, including the publisher of The Daily Mail.

Chesterman ruffled industry feathers. in a newspaper interview in which he called the traditional method of selling cars «flawed at every level.»

Cazoo spent tens of millions of pounds a year on sports sponsorship and advertising, seeking to raise its profile, while the management made ambitious plans to conquer Europe.

Its name has appeared on at least nine football clubs, including Premier League stalwarts Everton and Aston Villa, as well as Spanish clubs Valencia and Real Sociedad, French giants Olympique de Marseille and German Freiburg.

It has also become a major sponsor of the St Leger Stakes, The Hundred, the Rugby League World Cup, the World Snooker Tour and the PDC World Darts Championship.

The company's marketing spend topped £45m in the first six months of 2022 alone, but by the second half of the year the budget began to tighten as Cazoo's fortunes slumped, forcing it to make deep cost cuts.

Cazoo has pulled out of Europe, where it has expanded into many countries, closed two of its three UK car transfer centers where customers collect their cars, cut its fleet of vehicles by a fifth and cut hundreds of jobs.

However, this was not enough to maintain the share price or put it on a profitable footing. Its total loss at the end of June last year was £1.4 billion.

Meanwhile, its market capitalization fell to just $38 million during the one-for-100 reverse share split that accompanied its debt restructuring agreement with creditors.

A spokesperson for Cazoo said: “Cazoo does not comment on market rumors, but… as we have made clear in our SEC filings, we have begun evaluating potential partnerships, synergies, mergers, acquisitions, joint ventures and sales in light of our improved capital structure. »