British online car retailer Cazoo Group Ltd (NYSE:CZOO) has warned that it may run out of cash by the second half of 2024 unless it succeeds in raising additional capital.
Cazoo sounded the alarm bell in a Monday filing with the US regulators, shortly after the New York-listed group announced a debt restructuring that reduced its debt from $630 million to $200 million.
Per the filing: “We have limited liquidity and will need to raise additional capital before the beginning of the second half of 2024 in order to satisfy our liquidity needs going forward, as well as to pursue our business objectives and to capitalise on business opportunities, and there is no assurance that we will be able to raise the necessary capital on terms acceptable to us or at all.”
By the end of the year, Cazoo expects to have between £100 million and £115 million in cash and cash equivalents, with an additional £20 million to £30 million in self-financed inventory.
The company is using £30 million to £40 million each quarter in operations, though that figure is expected to decrease to £25 million to £35 million from 2024 onwards.
Cazoo is under a liquidity covenant to maintain at least £50 million in cash and cash equivalents, starting from the quarter ending December 31, 2023.
Cazoo has faced continuous losses since its inception in December 2019, amounting to approximately £1.4 billion as of June 30, 2023.
Chief executive Alex Chesterman, who once called the traditional method of selling cars “flawed on every level”, announced his retirement from the company after a car crash earnings call earlier this year.
The company's interim financial statements from August 2023 raised doubts about its ability to continue as a going concern amid a challenging macroeconomic outlook in the UK and globally.
Cazoo is incorporated in the Cayman Islands, which may pose challenges for shareholders in the event of a liquidation.
“Because we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the US Federal courts may be limited,” said Cazoo in its Monday regulatory filing.
Cazoo’s shares have collapsed over 99% since going public in December 2020.