Online car retailer Cazoo goes public through $7bn SPAC

29 Mar 2021

Cazoo founder Alex Chesterman. Image: Cazoo

The UK company is just three years old but has gone public by merging with a blank-cheque firm in the latest big-money SPAC.

Fast-growing online car marketplace Cazoo is going public through a merger with a blank-cheque firm at a $7bn valuation.

The UK company was only founded in 2018 but has raised more than $550m in venture capital funding. It is listing on the New York Stock Exchange by merging with a special purpose acquisition company (SPAC) called AJAX I, avoiding the traditional initial public offering requirements.

AJAX I was established by billionaire investor and hedge fund manager Dan Och with backing from founders at Instagram, Square and 23andme. Och will join the board of Cazoo as part of the deal, which is expected to raise $1.6bn in new funding for the company.

Cazoo’s SPAC listing is the second major stock market debut from a UK tech company in a week, after electric car maker Arrival. The two listings have seen the companies achieve hefty valuations, but both opted for US stock markets rather than their home country in a blow to London’s efforts to attract more tech listings.

Cazoo’s Amazon-style online marketplace for used cars operates in the UK, Germany and France and promises speedy sales completed within 72 hours. According to the company, it expects to reach revenues of $1bn in 2021, which it said will be a 300pc increase year on year.

“This announcement is another major milestone in our continued drive to transform the way people buy cars across Europe,” Cazoo chief executive Alex Chesterman, who previously founded property site Zoopla, said. “We have created the most comprehensive and fully integrated offering in the largest retail sector which currently has very low digital penetration.”

Many investors who pumped money into the company could now be looking at a return on their investment much earlier than expected. Some of these investors include Mubadala Capital, a division of the UAE’s sovereign wealth fund, and DMGT, the owner of the Daily Mail.

Daniel Sundheim, founder of D1 Capital Partners, another backer of Cazoo, said the company had “many options for funding its strategy” but merging with a SPAC was the right one.

This approach has exploded in popularity over the last year as a way to take companies public. Last week, it was announced that WeWork is finally set to go public after agreeing to merge with a SPAC called BowX Acquisition.

Jonathan Keane is a freelance business and technology journalist based in Dublin