9:20 am, February 8, 2023
Cazoo has merged all its share capital in the latest round of its fight to stay financially healthy.
The corporate action – referred to as a reverse stock split – was given the go-ahead by more than 95 per cent of the board of directors yesterday (Feb 7) and involves the issued and unissued share capital merged into fewer shares at a higher price.
Doing so normally indicates that a business is in trouble, as it’s increasing the value of shares that are otherwise low in price.
It has consolidated them at a ratio of 1-for-20 and as a result its authorised share capital will be $435,500 (circa £360,046), divided into 165m Class A ordinary shares, 2.5m Class B ordinary shares, 50m Class C ordinary shares and 250,000 preference shares, all at a face value of $0.002 each.
Last month, the NYSE suspended trading in Cazoo warrants and began delisting proceedings, although trading in shares continued.
Cazoo said that as a result of the reverse stock split, the number of Class A shares issuable upon exercise of its 21,129,818 private warrants and 20,124,748 public warrants will be reduced so that each warrant will entitle a holder to buy 1/20th of a Class A share.
The exercise price of each warrant will go up from $11.50 (£9.51) per share to $230.00 (£190.14) per share.
The move comes into effect today (Feb 8) at 9.05pm GMT (4.05pm ET) and the Class A shares will begin trading on a split-adjusted basis when the NYSE opens for trading tomorrow (Thursday, February 9).
The Class A shares will continue to trade on the NYSE under the usual trading symbol of ‘CZOO’ but will trade under a new Cusip number – a unique nine-digit number given to all stocks and registered bonds in the US and Canada.
The Cusip (Committee on Uniform Securities Identification Procedures) number creates a firm distinction between securities that are traded on public markets
Cazoo’s current share price is 24 cents.
The self-styled online used car disruptor – which floated on the New York Stock Exchange (NYSE) in August 2021 – is having to carry out the action as its share price has been consistently below the $1 threshold set by the NYSE.
Companies have to keep it above that threshold or risk being delisted.
The reverse stock split doesn’t directly affect the value of a company, just its stock price.
Ratios can range from 1-for-2 to as high as 1-for-100, and as well as stopping a company from being removed from a stock exchange, the advantages can include attracting major investors, satisfying the regulators and boosting any spin-off prices.
However, a reverse stock split isn’t generally looked on favourably by market players as it signals that a share price has sunk to the bottom and that the business management is trying to boost the prices artificially without there being any proper business proposition.
What’s more, the stock liquidity may also suffer because of the number of shares being reduced in the open market.
Cazoo is currently consulting with hundreds of staff across the UK as it looks to close 15 customer centres and a host of prep sites.
The extent of the company’s job cuts are not yet known in detail, but an all-hands call leaked to Car Dealer revealed 15 of its customer centres were facing the chop across the UK.
Only those in Bristol, Birmingham, Chertsey, Lakeside, Manchester, Northampton and Wembley are likely to remain open.
Just three of its preparation centres – snapped up as part of a host of multi-million-pound deals as the company grew rapidly – are set to remain open.
Four are earmarked for closure under the proposals – Westbury, Long Bennington, Livingston and Gloucester.
Sites at Portbury, Cold Meece and Bedford are the proposed prep centres to remain open. Cazoo says ‘nothing has yet been decided’.
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