UK Edition
Cazoo could see its market value sink further this week amid speculation that former Daily Mail & General Trust shareholders will sell their long-awaited shares in the online car dealer.
Former DMGT investors will this week finally receive their stake in Cazoo, which was promised as part of a deal struck to take the Daily Mail publisher private.
DMGT was an early investor in Cazoo and the company’s high valuation last year helped DMGT’s controlling shareholder Lord Rothermere fund a takeover.
Cazoo shares were used to sweeten Lord Rothermere’s offer. About a third of the £12.63-per-share headline offer for DMGT was in the value of Cazoo shares, with £8.55 in cash and cash dividends.
Transfer of the shares has been delayed several times beyond the original due date of 27 February, when Cazoo shares were worth $4.24 (£3.48). Its share price has dropped dramatically in recent months and the stock is now changing hands at 99 cents.
DMGT investors will finally receive the shares on 23 June, almost six months after receiving the cash segment. William Mileham, an analyst at Mirabaud Securities, said former DMGT investors, who own about 84m Cazoo shares, or about 11pc of the company, may be tempted to cut their losses and sell.
“Cazoo has literally been ripping through their cash since their IPO,” he said.
Cazoo, founded by Zoopla entrepreneur Alex Chesterman, listed itself via a special purpose acquisitions vehicle (Spac) last year in New York, raising $1bn in a float that valued it at $8bn.
The company’s share price is down 90pc since then and Cazoo is now worth $722m.
That is still a rich valuation compared to other car dealers, which generally own land, pay dividends and post profits, said Mileham.
Bricks and mortar competitor Pendragon is worth £286m, Lookers is valued at £291m and Vertu £186m. Each sold more cars last year than Cazoo, which posted a loss of £330m in 2021.
Earlier this month Cazoo announced 750 job cuts and a hasty retreat from the new car leasing business it had only seven months ago spent £24m expanding further into, with the purchase of Spain’s Swipcar.
The company blamed a gloomy economic outlook and high inflation eating into its customers’ disposable incomes.
Competitors have also imitated its app-only sales model while offering options such as dealer visits, test drives and repairs.
Cazoo did not immediately respond to a request for comment.
DMGT shareholders were promised 0.5749 shares in Cazoo for each DMGT share they held. Shares formed part of a special dividend that also included cash.
Had former DMGT investors received their Cazoo shares alongside the cash segment, they could have sold them for $6.09 per share.