Cazoo shares climb on first trading day in New York

·3-min read
Cazoo the most valuable UK firm ever to launch on Wall Street. Photo: Press Association
Cazoo the most valuable UK firm ever to launch on Wall Street. Photo: Press Association

Shares in Cazoo (CZOO) rose as much as 7% on Friday as it began its first day of trading on the New York Stock Exchange, in a deal valuing the group at $8bn (£6bn).

The car dealership confirmed that it had completed its multibillion dollar merger with AJAX I, a publicly traded special purpose acquisition company (SPAC) backed by US hedge fund boss Dan Och.

The deal made Cazoo the most valuable UK firm ever to launch on Wall Street.

It raised over $1bn which will be used to further build out its brand and infrastructure, as it continues to transform the car buying and selling experience across the UK and mainland Europe.

Founded less than three years ago, Cazoo’s valuation has soared from $2.5bn at a private fundraising in October 2020.

“Today is an important and exciting day for Cazoo as we enter the public markets,” Alex Chesterman, founder and chief executive of Cazoo, said.

“Since we announced the transaction earlier this year, we have continued to see record growth in our revenues and gross profit, have brought our UK vehicle reconditioning in-house, providing full control of our operations and logistics and have started buying and reconditioning cars in mainland Europe ahead of our launch later this year.”

Cazoo currently employs more than 1,800 staff members in the UK, Germany, France and Portugal, and has delivered more than 20,000 cars to consumers across the UK.

It has been described as the “Amazon (AMZN) of the used car market”. It owns and reconditions all its cars before offering them for sale on its website for either delivery or collection in as little as 72 hours.

The company has previously said that it expects to report revenues of up to $1bn for this year, representing a 300% jump in comparison to the year prior as the pandemic exacerbated the shift to online platforms.

Read more: Everything you need to know about SPACs, the hottest trend in finance

The deal also delivered a windfall of around $1.35bn for shareholder Daily Mail and General Trust (DMGT.L), owner of the Daily Mail, which invested £117m ($161m) in the firm giving it an approximate 20% stake.

Och, founder of AJAX, said: “We are very pleased to close the business combination with Cazoo and to partner with Alex Chesterman and his outstanding team. By leveraging data and technology, Cazoo is delivering a superior car buying and selling experience in the UK and mainland Europe and building a strong competitive moat.

He added: “With the large and fragmented nature of the market and incredibly low digital penetration, Cazoo has multiple levers to drive its growth and long-term sustainable shareholder value as it transforms the market.”

Cazoo is the latest company to take advantage of a growing SPAC trend.

Known as “blank cheque companies,” SPACs are essentially empty cash shells — companies with no operations that are created simply to hold investor money and then spend it.

Management try to identify a company or assets to buy, thus giving the SPAC stake inherent value.

SPACs typically target deals to take private companies public. The benefit for companies that get acquired is it can be a quicker and easier way of listing on the stock market.

Notable examples of companies that have gone public through SPACs include Nikola (NKLA), DraftKings (DKNG), and Virgin Galactic (SPCE). Social Capital founder Chamath Palihapitiya is the best known SPAC "sponsor," as founders of the vehicles are known.

Cazoo’s decision to make its market debut in New York comes as a blow to the London Stock Exchange (LSE), which was believed to have lobbied for the business to list in its home market.

Watch: What are SPACs?

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