Used car dear Cazoo on the verge of bankruptcy

Cazoo, the used car company founded by Alex Chesterman, is facing the possibility of administration as it struggles to secure emergency funding to cover significant losses.

The company has filed for protection from its creditors, demanding 10 days of protection against creditor claims while it explores options to avoid insolvency, including administration or liquidation of the company.

Founded in 2018 by Chesterman, known for his previous successes with Zoopla and LoveFilm, Cazoo quickly gained traction in the market, expanding across Europe and listing on the New York Stock Exchange in 2021 at a valuation of $7 billion. However, despite rapid growth and significant marketing investment, the company has reported significant losses in recent years, totaling £531.5 million in 2021 and £525.5 million in 2022.

Efforts to reduce costs by cutting jobs and withdrawing from operations in certain countries have not been enough to offset the losses. Chesterman himself saw a significant reduction in his stake in Cazoo after a $630 million debt-for-equity swap on bonds, transferring majority stakes to Viking Global Investors.

In an effort to become profitable, Cazoo announced a change in its business model, moving from selling used cars to an advertising marketplace similar to Auto Trader. This strategic change also coincided with the announcement of CEO Paul Whitehead’s departure after just one year in the role.

Despite its recognized brand and online presence, Cazoo’s shares have plunged more than 90% in the past year, reflecting investor concerns about its financial sustainability. The company’s future now hangs in the balance as it navigates options to address mounting challenges and reshape its business strategy.