Cazoo Plans its Public Debut

Cazoo Merges With a SPAC

Cazoo, the UK-based used car marketplace operator, is going public by combining with AJAX I (AJAX), the special purpose acquisition company owned by American hedge fund manager and billionaire Daniel Och. The deal is reportedly valued at $7 billion.

Cazoo started three years ago operating a marketplace for UK car and truck buyers, selling and delivering cars in the UK and Europe. High-profile companies Carvana (CVNA) and Autotrader (ATDRY) are among its main rivals.

As part of the deal, Cazoo founder Alex Chesterman will remain at the helm as CEO. Och gets a seat on the board as part of the transaction.

Why a SPAC Deal?

Cazoo is the latest private company to tap the public markets through a SPAC transaction. SPACs, like AJAX I, are shell companies created solely to raise money to make acquisitions of private companies. The SPAC-purchased company can then trade on the stock exchange without undergoing a traditional initial public offering. In 2021 alone, US-focused SPACs raised $87.9 billion. This is higher than the amount raised in all of 2020.

Upon completion of the transaction, Cazoo will trade on the New York Stock Exchange. That’s seen as a negative for the London Stock Exchange, which has been working to draw more tech companies its way. The SPAC boom in the US hasn’t materialized in the UK yet, although there are signs the UK may ease rules to welcome US SPACs.

Cazoo Rides the Online Buying Boom

Cazoo is expected to raise $1.6 billion when it makes its public debut. Of that, $805 million will come from the SPAC and $800 million will come from outside investors.

Interest in Cazoo is surging thanks in part to the COVID-19 pandemic, which forced people to purchase all sorts of items, including vehicles, over the internet. While online car sales are still a small portion of overall car sales, they are growing rapidly. Cazoo had annual revenue of $600 million in the first fiscal quarter, and it expects that to hit close to $1 billion by 2021. Investors will be eager to see what is down the road for Cazoo as it gets ready to go public.

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