Alex Chesterman is a master of imitation. The 52-year-old entrepreneur’s previous successes, Zoopla and Lovefilm, were inspired by US players Zillow and Netflix, respectively.
Cazoo, Chesterman’s used vehicle online retailer that was set up in 2018, is modelled on Arizona-based Carvana. The “Amazon of cars”, founded six years earlier, delivers used vehicles to purchaser’s doors. Having gone public at a $2bn (£1.6bn) valuation in 2007, Carvana exploded to a $70bn (£56bn) valuation by last summer on a promise to rewrite the rules of how cars are bought and sold.
When Cazoo followed it onto the US stock market in August, it was unsurprising that investors were desperate to snap up a stake.
Now, however, the wheels appear to be coming off. As the cost-of-living crisis bites, alongside a shortage of vehicles and a market shift away from tech stocks, Cazoo’s share price is deep in the red.
Despite being just three years old and yet to make a profit, the company – which buys, sells and delivers used cars in the UK and Europe – went public in a reverse-merger “Spac” deal at an $8bn valuation. Chesterman joined the ranks of Britain’s tech billionaires and said the company was braced for “tremendous growth”.
Comparisons can be dangerous, however. Since a peak last summer, Carvana’s shares have fallen by 84pc amid a short supply of used vehicles and as Americans return to physical dealerships without restrictions.
Cazoo has followed. Since going public just over nine months ago, shares have slumped – also by 84pc. Chesterman’s 23.4pc stake is now worth $300m, down from $1.8bn, while the value of a 17.5pc stake owned by former investors in the privatised Daily Mail owner DMGT has shrunk from $1.3bn to $224m.
“Alex Chesterman was very outspoken about copying this US business model,” says David Reynolds of Davy Research. “He was very explicit: ‘That’s what we want to be, we want to be the European Carvana.’ But what was painted as a beautiful example of excellent execution of an online business model is now beginning to look somewhat exposed.”
Carvana’s market struggles came at an awkward moment for Cazoo, whose stock market debut was the biggest US listing of a British company.
But its problems do not end there: progress has been slower than expected.