The online used car seller Cazoo has been sold for just £5 million, a stark contrast to its £6 billion valuation three years ago, according to the Telegraph. Administrators from Teneo revealed that £2.6 million has been realised from the sale of Cazoo’s remaining operations, with an additional £2.4 million expected over the next six months.
Motors.co.uk, which acquired Cazoo’s brand and marketplace business last month, has relaunched the service. The purchase price remains undisclosed. This relaunch comes three months after Cazoo entered administration.
Cazoo went public in New York in 2021, during a surge in interest in special purpose acquisition vehicles (SPACs). The deal valued the company at $8 billion (£6.3 billion). However, Cazoo never achieved profitability and struggled to raise new funds, leading to cost-cutting measures and withdrawal from key markets.
Beyond the sale to Motors.co.uk, Cazoo’s wholesale division was sold to vehicle auctioneer G3, while certain property leases were acquired by Constellation, the owner of rival site Cinch.
The total proceeds from asset disposals fell short of the amounts Cazoo spent on sponsorship deals with Aston Villa and Everton football clubs, which were reported at £6 million and £10 million annually. Cazoo’s collapse left it with £259 million in debt to unsecured creditors and just £43 million in assets, according to administration documents.
Administrators estimated a combined deficit of £223.7 million for Cazoo’s three entities in administration. They cited “aggressive expansion strategies, a competitive market, high customer acquisition costs, and unfavourable economic conditions” as key factors in the company’s downfall.
Cazoo was founded by Alex Chesterman, former Zoopla and Lovefilm CEO, whose fortune was significantly boosted by the company’s flotation. As financial difficulties mounted, Cazoo cut jobs, exited European markets, and converted $630 million of debt into equity. Chesterman stepped down last year. Initially, Cazoo owned all its car stock, purchasing vehicles from sellers to resell at a margin. It later adopted a marketplace model, facilitating direct transactions between buyers and sellers.
The sale of Cazoo for £5 million after being valued at £6 billion three years ago highlights the challenges faced by the company in a competitive market. The drastic difference in valuation serves as a cautionary tale for businesses looking to expand rapidly without a sustainable business model in place. The impact of economic conditions and high customer acquisition costs further contributed to Cazoo’s downfall.
As the automotive industry continues to evolve, companies must adapt to changing consumer demands and market conditions to ensure long-term success. The acquisition of Cazoo’s operations by Motors.co.uk and other entities underscores the importance of strategic partnerships and restructuring in times of financial distress.
Overall, the sale of Cazoo reflects the complex nature of the business world and serves as a reminder of the risks associated with rapid expansion and high valuations without a solid foundation. Businesses must carefully assess their growth strategies and financial health to withstand challenges and remain competitive in the ever-changing marketplace.