Cazoo poised to enter administration

The online car supermarket Cazoo is facing insolvency after failing to secure the necessary emergency funding. Founded by Alex Chesterman, a former Zoopla executive, Cazoo has declared its intent to appoint administrators as confirmed by a High Court filing. This development follows a significant decline in the company's fortunes; after reaching a market valuation of over $8 billion upon its 2021 IPO on the New York Stock Exchange, its stock price plummeted. The company underwent multiple restructurings and refinancings, including a notable $630 million debt-for-equity swap in December, to try to stabilize its financial position.

Recently, Cazoo revealed its urgent need for additional capital, stating its quarterly cash burn was around £30 million, and acknowledged the absence of external capital offers. The company is exploring the sale of parts of its business as potential alternatives to avoid administration or liquidation. At its peak, Cazoo employed over 5,000 people, but reduced its workforce significantly to about 1,500 as of March 2023 in an attempt to remain viable.

Cazoo initially operated by owning and delivering used cars from its hubs across the UK but shifted to a purely online marketplace model earlier this year, mirroring platforms like Autotrader. This shift included selling off vehicle stock and downsizing operations. Recently, three of Cazoo’s UK subsidiaries have filed for administration, indicating severe financial distress.

The company's struggles reflect broader market challenges, including a downturn in used car values and hesitancy around electric vehicle demand. Cazoo’s predicament exemplifies the difficulties faced by several UK firms that went public in the US through special purpose acquisition companies (SPACs) and subsequently faced financial hardships.