8:14 am, December 19, 2022
Online used car dealer Cazoo’s share price has tanked to a new record low of just $0.13 – valuing the business at just over £79m.
The share price has plummeted 45 per cent in the past five days and has now fallen an incredible -98.8 per cent since the used car seller listed.
Cazoo was valued at £6.5bn when it launched on the New York Stock Exchange in August 2021.
The car dealer raised £728m before expenses from the flotation and used the money to expand its business in Europe.
Cazoo also ploughed tens of millions into sports sponsorship deals – putting its name to two Premiership football teams, horse racing, darts, snooker and more.
Last week, Cazoo said it had sold its Spanish subscription business Swipcar – the firm it bought just over a year ago for €30 million.
Two months ago it also sold its Italian business Brumbrum less than nine months after shelling out £67m for it.
How much cash Cazoo got back from these sales is unknown as financial terms were not released.
Cazoo is desperately trying to unwind its ill fated European expansion to stem its losses.
The used car dealer’s latest stock price crash has also been accelerated as investors panic over the similar US-based business Carvana.
The US firm – which sells cars from vending machines – was one Cazoo admitted it aimed to emulate at launch and is now in serious difficulties. Last week shares in Carvana fell 33 per cent as Forbes reported its ‘bankruptcy risk’ was rising.
Mike Jones, automotive consultant and the compiler of the Car Dealer Top 100, said: ‘When they were raising funds, Cazoo benefited from the similarities in their business model with Carvana.
‘This drove the sky high initial valuation, however the stock market has now turned against both businesses, who have seen their share price fall by more than 97 per cent in the last year.
‘Listed businesses now have to show profitability to attract value and both companies are in a race to remove their cash burn and turn profitable before they run out of the cash piles they amassed in their fundraisings.
‘Alex Chesterman clearly believes this is possible, having upped his stake in the business to 24.4 per cent in the second half of 2022.’
It’s not just the Carvana woe that has weighed on the share price, though. Falling used car prices, concerns over a cost of living crisis and fears over how a recession will impact the market are also causing concerns among investors.
David Kendrick, partner at accountancy UHY Hacker Young, thinks Cazoo’s issues are more likely linked to the fact consumers don’t want to buy used cars online en masse.
He told Car Dealer: ‘This is a worrying time for sure for Cazoo. How low can the share price go before someone takes them out or shareholders lose confidence?
‘For me, the online only model doesn’t work and the market isn’t ready for it. The car retail consumer still wants to go to a dealership and the huge expenses that Cazoo must be incurring aren’t sustainable.
‘It’s not good news for the sector as it creates negative headlines and creates nervousness in the finance sector around car retail which is unjust when the wider market is actually still performing strongly.’
Big Motoring World boss Peter Waddell spotted the Cazoo share price fall and asked his LinkedIn followers for their views over the weekend.
‘How low is it going to go?’ he asked, on the social platform.
‘I feel so sorry for all the investors who have invested absolutely millions upon millions of their hard earned pensions. People should be held accountable for what has happened here.’
Waddell launched his online used car rival Carzam in 2020 but it was placed in voluntary receivership in June this year.
At the time of the collapse, Waddell pinned the blame on Cazoo’s falling share price which meant raising cash for Carzam became harder.
Carzam owed its creditors £18.9m when it failed with the founders Waddell and John Bailey owed £12m between them.
Cazoo is drastically trying to turn around heavy losses it incurred in 2021 – losses more than tripled on the year before to £329m.
It is now focussing solely on the UK market and is convinced it can grow again.
Cazoo founder Chesterman said: ‘Our strong growth and momentum in Q3 and our continued focus on cash preservation gives us great confidence in our ability to become the largest and most profitable used car retailer in the UK over time.’
The firm said it is now aiming to tip into profit by the end of next year.
At the time it announced plans to withdraw from Europe, Chesterman said: ‘The strong customer demand we are seeing in the core UK business gives us high confidence in the future opportunity and the decision we have taken today to withdraw from mainland Europe ensures that our balance sheet remains strong and that we have a plan which we believe no longer requires any further external funding.’
Cazoo has been offered the opportunity to comment on its most recent share price fall.
