Cazoo has responded to claims that it could be in administration at the mid-year point by outlining the “evaluation” of its future options.
The Daily Telegraph reported that Cazoo is seeking a “cash lifeline” from investors to secure the business before it burns through its funds this year and claimed it has brought in restructuring advisors.
In December Cazoo reported that it was still burning through around £40m of cash each quarter and there was a risk it would run out of capital in mid-2024.
Some of its lending agreements require it to maintain a cash cushion of £50m or face potential insolvency.
Cazoo responded to the Telegraph that it does not comment on market rumours, but added: “As we have made clear in our SEC filings, we have commenced an evaluation of potential partnerships, synergies, mergers, acquisitions, joint ventures and sales in the light of our improved capital structure.”
In September 2023, Cazoo agreed to a debt-for-equity swap on nearly $630m of debt. While investors were already facing a heavy loss, the deal would even further dilute the value of their shares. News of the arrangement sent shares of the beleaguered car seller tumbling, with shares down 23 per cent in afternoon trading, taking them to under one per cent of their IPO value in 2020.
Cazoo’s H1 2023 losses were cut from £241m to £151 by cost-slashing measures, including closures and sell-offs of many of its customer centres and vehicle preparation factories, plus cancelling expensive marketing and sports sponsorships.
Its full-year results are expected to be published in the coming weeks.
Despite the latest report, Wall Street traders are fairly positive on Cazoo Group shares. On average, analysts give CZOO a ‘Hold’ rating. The average price target is $242, which means analysts expect the stock to increase by 5277.78% over the next twelve months.