When Cazoo listed in 2021, it had a lofty $8bn valuation, making it one of the biggest debut public valuations for a European tech company. Today, its market cap stands at just $46m. There are houses worth more than that.
The share price continues to trade so low, insiders told Sifted last month, because investors are wary of backing a company burdened by a $630m debt facility. Debt investors get paid back first when a company folds and that, insiders told Sifted, reduces the attractiveness of the stock for other investors.
Today, Cazoo announced it was in discussions for a “potential debt restructuring” — a move which could help revive investor confidence in the company.
The debt is in the form of convertible notes — short-term debt that converts into equity at a later date if it's not repaid. The funding, raised in February last year, was led by Viking Global Investors, a Connecticut-based hedge fund, and also includes existing Cazoo investors like Mubadala and Willoughby Capital. Viking owns $300m of the convertible notes.
According to SEC filings, Viking’s stake will equate to 7.3% of the company once the notes convert — making it the third-largest shareholder behind cofounder Alex Chesterman and Matrix Capital, a UK-based investment fund. Viking declined to comment on the restructuring talks.
Cazoo’s choice of a convertible note is not rare. Many startups raise them, as they don’t dilute shareholder equity until they convert into shares.
In Cazoo’s update today, CEO Paul Whitehead, who took over from the company’s founder, Alex Chesterman, last month, also said the company ended April with £215m in cash and equivalents, the same figure as at the end of March. One of Whitehead’s central tasks has been to reduce cash burn.
Cazoo today also reported it has upped its gross profit per car (GPU) and expects the figure to reach £1,200 in the current quarter. GPU stood at £309 in the same quarter last year.
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