Cazoo Collapses After $8 Billion Valuation Debacle

Cazoo In Administration 3 Years Post $8B NY Flotation

Alex Chesterman, the founder of Zoopla, started a business selling secondhand cars. The company got into financial trouble and asked for help to avoid paying its debts. They warned their investors that they might have to file for bankruptcy. Teneo, a group of experts who specialize in fixing struggling companies, are now in charge of trying to make things better.

Cazoo was established by Chesterman, who had previously achieved triumphs with Zoopla and LoveFilm. The company commenced operating as an internet-based store, managing the sales of pre-owned vehicles. Nonetheless, it later transformed into an advertising hub resembling Auto Trader. Regrettably, this alteration was implemented after it was too late to rescue the company from its monetary difficulties.

Cazoo started in 2018 and grew fast. They spent a lot of money on marketing by sponsoring sports like cricket, rugby, snooker, and golf. Even though they grew quickly, the company didn't make any money. In 2021 and 2022, they reported losing a lot of money. This made them cut jobs and stop working in Germany, France, and Italy.

Cazoo recently made some changes to their business. They got rid of their wholesale division, vehicle repair centre, and customer collection centres. This helped them get more money, with over £98 million as of May 13. However, they also had to change their advertising strategy, which led to 728 people losing their jobs.

When Cazoo announced that it was going into administration, Teneo stated that nearly 100 car dealers had shown interest in using its marketing platform. Teneo wants to keep advertising Cazoo’s marketplace, hoping to sell it in the next few weeks. At the moment, Cazoo has about 200 workers.

Matt Mawhinney, who is a joint administrator at Teneo, explained that Cazoo has chosen to shift its model to a marketplace. As a result, the company has been closing down its old services and selling many of its businesses and assets. By doing this, it has increased the value for those who are owed money, saved numerous jobs, and made sure that new operators will take over the leases to reduce losses for landlords.

Last year, Chesterman's ownership in Cazoo decreased significantly as the company conducted a transaction where they swapped $630 million in bonds for equity. This led to Viking Global Investors, which is a hedge fund based in the United States, getting majority control of the company.

Cazoo has experienced a decline at a time when many businesses listed on the London Stock Exchange are looking to achieve better valuations by seeking US listings. Those who disapprove of this trend claim that investors in London are excessively wary and do not offer sufficient support to entrepreneurial endeavors. In 2020, Tom Blomfield, the former CEO of Monzo, observed that the UK is not always welcoming to daring founders who desire to engage in unique ventures. As a result, he decided to relocate to San Francisco to invest in fledgling technology enterprises.

Nevertheless, UBS and HSBC have released positive outlooks for UK stocks in the coming year. UBS predicts that the London market will enjoy the benefits of a resurgence in the global manufacturing sector, thanks to its involvement in energy and commodities. Meanwhile, HSBC observes that UK pension funds have finished offloading UK stocks, having removed a whopping £2 trillion from the market in the past 30 years.