8:20 am, May 2, 2024
Cazoo – the failed used car dealer turned advertising marketplace – has admitted it may soon fall into administration.
In a bombshell announcement to the New York Stock Exchange late last night (May 1), Cazoo said it has failed to secure any new funding for the struggling business.
Cazoo said it had also been looking for offers for the business as well as ‘strategic alternatives’ – all of which have failed.
Now, the listed business has admitted that without access to ‘significant strategic alternatives or outside capital’ it is ‘reasonably likely’ that the company will need to file for ‘administration or liquidation’.
Cazoo said: ‘We would then consider the best options for the company at that time. The options may include filing for administration or winding up the company.’
The announcement also included news that Cazoo has missed the deadline for reporting its 2023 accounts – because of pressures on management – and that Paul Woolf, CFO, has now left the business.
Founder Alex Chesterman and former CEO Paul Whitehead have also left the business in the last few months.
The New York Stock Exchange (NYSE) statement also admits that Cazoo currently has no offers of help and that the ‘medium-to-long-term future of the company’ is unclear.
The news comes hot on the heels of the Cazoo’s decision to quit used car sales and become an online marketplace to rival the likes of Auto Trader.
Car Dealer reported last week that the new digital service is now up and running, but that does not seem to have done anything to ease Cazoo’s financial woes.
In the filings Cazoo admitted that its cash burn how now eased and it expects to reduce its outlay from £25-£30m a quarter to £6-7m a quarter from July. These savings have been made after drastic cuts to its operations and huge swathes of redundancies.
Following the announcement, Cazoo’s stock price tumbled more than 11%.
The Cazoo statement said: ‘Notwithstanding our pivot to a marketplace model and the various asset disposals, we still need to raise additional capital in the future in order to continue as a going concern in the medium-to-long-term.
‘We currently have no offers to provide outside capital, or otherwise, to address this need.
‘We have been pursuing strategic alternatives for the business or parts thereof, and while we have received interest for parts of the company’s business and assets, we have not received any offers that would, if consummated, enable the company to continue as a going concern in the medium-to-long-term.
‘Accordingly, absent an agreement with respect to a significant strategic alternative or outside capital, it is reasonably likely that certain of the company’s operating subsidiaries would need to file for administration or liquidation and we would then consider the best options for the company at that time.
‘The options may include filing for administration or winding up the company.’
No time for financial results
Since launching back in late 2019, Cazoo has consistently posted heavy losses in its financial results, racking up huge debts in the process.
Now however, the company has ended that trend – by failing to even publish its latest results on time.
Cazoo had been due to file its latest accounts with the NYSE yesterday (May 1) but has now missed that deadline.
Bosses say the issue has arisen due to its pivot to the marketplace model and major time strain on management.
They also admit that they do not know when 2023’s results will be published – a significant breach of NYSE regulations.
The statement added: ‘As a result of the significant amount of time devoted by management to pursue the strategic initiatives described above, and the pivot to the marketplace model, which has also required a dedication of the company’s limited personnel and resources, and because of our liquidity concerns whereby we would not be able to demonstrate our ability to continue as a going concern in the medium-to-long-term, the company was unable to complete the preparation and review of its financial statements and disclosures for the fiscal year ended December 31, 2023.
‘The company does not currently expect to file the 2023 Form 20-F on or before the fifteen-day extension period granted pursuant to Rule 12b-25 under the Securities Exchange Act of 1934, as amended, and, at this time, the company cannot estimate when it will be able to file the 2023 Form 20-F, if at all.
‘Until such time as the company files its Form 20-F and is otherwise current in its filings with the SEC, shareholders will be unable to utilise Rule 144 for sales of restricted securities or sell registered securities off of the Company’s registration statements.
‘Failure by the company to timely file the Form 20-F is expected to generate a notification letter from NYSE that the company is no longer in compliance with the NYSE requirement for the timely filing of all required financial reports with the SEC.’
Cazoo also said its transition to a marketplace was well underway and as of the end of April it had 14,000 cars listed for sale from ‘a number of new partners’. For comparison, Auto Trader has more than 450,000 used cars advertised today.
The firm explained that consumers are also able to sell their cars to third parties via its website.
You can read the full statement to investors here.
The news is unlikely to attract much sympathy from the motor trade, following years of jibes from the one-time online disruptor and its founder Alex Chesterman.
You can learn more about the history of Cazoo here. Alternatively, you can watch our special documentary all about the firm’s rise and fall below:
Additional reporting by James Baggott
