London-based Cazoo, an online used car marketplace, announced on Thursday that it has raised $630M (approx €553M) by selling a stake of the company to a group of investors. The development comes nearly six months after the firm was listed on the New York Stock Exchange (NYSE).
The company raised the capital through a 2 per cent sale via convertible senior notes that subsequently will convert to Class A ordinary shares at a price of $5. This price represents a 20 per cent premium to the trailing 5 trading day volume-weighted average price of the share.
Alex Chesterman OBE, Founder and CEO of Cazoo, says, “This transaction, where we have raised an additional $630M, further reinforces the strong belief in Cazoo from new and existing shareholders who, like us, are extremely excited about the huge market opportunity that we have ahead of us. We are now very well-funded for the coming years to continue to capitalise on this opportunity and deliver the best car buying and selling experience for consumers across the UK and Europe.”
Combining Cazoo’s current funding and existing cash of approx $260M as of December 31, 2021, will leave the company with a pro forma cash balance of about $900M.
Investors and capital utilisation
The investment was led by new investor Viking Global Investors, along with participation from several existing shareholders, including Mubadala Investment Company, D1 Capital and Willoughby Capital, as well as other new and existing investors.
Cazoo claims that the additional capital will support its continued growth in the UK and expansion in Europe. The financing will help the company to execute its strategy over the coming years.
Alex Chesterman OBE says, “I am extremely proud of what Cazoo has achieved both since launch and particularly over the last 12 months. In 2021, our second full year of operation, we achieved record revenues of over £665M and have made significant progress on all aspects of our ambitious strategy. We have built a market-leading proposition which consumers love, a world-class team of over 4,000, a household brand that is now recognised by over 75 per cent of the UK population and significant infrastructure capabilities across the UK and EU.”
About Cazoo
Cazoo is the brainchild of Alex Chesterman. In 2003, he co-founded LoveFilm, which brought a transformation in the DVD rental market in the UK. In 2008, he came up with Zoopla, which brought transparency and efficiency in the proptech market. Zoopla was later acquired by Silver Lake in 2018 in a £2B (approx €2.3M) deal.
In the same year, 2018, Cazoo was born. “Used cars are one of the last remaining consumer markets yet to benefit from any digital transformation,” the entrepreneur said soon after its launch. It aims to become the “Uber” of the “used car marketplace”.
Cazoo claims that it wants its customers’ car buying experience to be seamless, transparent, and convenient – just like purchasing any other product online.
The company lists thousands of cars in stock at any time, all stored centrally in the Midlands. They are available either for home delivery anywhere in the UK or for collection from one of Cazoo Customer Centres within 72 hours. Every Cazoo car comes with a full 7-day money-back guarantee and a comprehensive 90-day warranty.
Cazoo’s recent growth and developments
In the past two years, the company claims to have established a market-leading platform, team, brand, and infrastructure in the UK and looks to expand in the EU, having recently launched in France and Germany and acquired businesses and teams in Italy and Spain.
In 2021, the company launched in both France and Germany. The company also acquired Swipcar in Spain and brumbrum in Italy, which has provided Cazoo with strong local teams, infrastructure, and capabilities. This will help the company to expedite the launch into the sizeable Spanish and Italian markets during 2022.
Over the past 12 months, Cazoo says it has also expanded its reconditioning capabilities, taking the UK reconditioning fully in-house and grown from just one site at this time last year to 11 in-house reconditioning sites with a potential output capacity of around 250,000 units per annum.
Besides, Cazoo has also increased the number of ancillary products it sells, most recently adding service plans, and launched its direct from consumer car-buying channel in the UK. This channel has been performing ahead of expectations and is materially expanding sourcing capabilities and diversifying the buying mix.
In 2022, the company expects to sell over 100,000 retail units and generate revenues in excess of £2B, representing year-on-year growth of approx 200 per cent.