Cazoo, the used-car business founded by Alex Chesterman, is facing the possibility of administration as it struggles to secure emergency funding to address its significant losses.
The company has filed for protection from its creditors, seeking ten days of safeguarding from creditor claims while exploring options to avoid insolvency, including administration or winding up the company.
Founded in 2018 by Chesterman, known for his previous successes with Zoopla and LoveFilm, Cazoo quickly gained traction in the market, expanding across Europe and listing on the New York Stock Exchange in 2021 with a valuation of $7 billion. However, despite its rapid growth and significant marketing investments, the company has reported substantial losses in recent years, totaling £531.5 million in 2021 and £525.5 million in 2022.
Efforts to reduce costs through job cuts and withdrawing from operations in certain countries have not been sufficient to offset the losses. Chesterman himself saw a significant reduction in his stake in Cazoo following a debt-for-equity swap on bonds worth $630 million, which transferred majority control to Viking Global Investors.
In an attempt to pivot towards profitability, Cazoo announced a change in its business model, transitioning from selling used cars to becoming an advertising marketplace akin to Auto Trader. This strategic shift also coincided with the announcement of CEO Paul Whitehead’s departure after just one year in the role.
Despite its recognized brand and online presence, Cazoo’s shares have plummeted by over 90% in the past year, reflecting investor concerns about its financial sustainability. The company’s future now hangs in the balance as it navigates its options to address its mounting challenges and reshape its business strategy.
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Used car darling Cazoo on brink of insolvency
