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It's quite astonishing. The article shows at least 6 online-first car dealers with *proven* multi-billion-dollar valuations from at least 4 countries, where global investors are (literally) pouring in tens of billions to become the next "Amazon of cars". They are shovelling in cash. It is happening, before our very eyes... And, still, British "investors" cannot help but moan, sneer, and pretend it's not happening! UK is always getting left behind by richer countries.
Said it below already, but the online race for UK and European car sales is now underway. Car showrooms are the past. Online websites are the future. And the online future is one where the "winner takes all". The prize is huge. Think Asos, Uber, Amazon, etc. LOOK and PDG have quietly become serious online retailers during lockdown. Their assets are now worth billions (see above). Time for a rerate ;-)
Definitely Letsil. The emphasis should be more on the on-line plays likely to drift down to our PEG level rather than us drifting up to theirs.
Do you not think though that the US valuations are ridiculous based on the profitability of the business.I am a holder here and would love to have a much higher sp but think we need to be realistic!
Skier, you definitely have a point re. the optimism in the NYSE/Nasdaq markets. I just question whether such a re-list is even commercially feasible for Lookers. i.e. we would be a UK-based operation appealing to US investors.
That article illustrates perfectly why the London stockmarket is dying. Why Cazoo has chosen to IPO in NY and not London. British "investors" are relentlessly miserable, backward-looking, and have an uncontrollable desire to talk everything down.
It is why LOOK should list in New York, where investors are much richer, forward-looking, and positive about the modern world. Either spin-off the online division in NY, or delist from London and relist everything in NY.
From Blom.
Suggests that on-line pure plays are overvalued with a brief mention of Lookers.
Everybody Wants To Be A Used Car Billionaire
Competition to sell used cars online is great for consumers. But will the financial returns match the high valuations of Carvana, Cazoo.
What’s the fastest way to get rich nowadays? Non-fungible token artworks might work for some but huge fortunes are also being made in the more humdrum business of used cars.
British start-up Cazoo Ltd. began selling second-hand cars online in December 2019. It handed over just 12,000 vehicles last year and its gross profit margin — the money left over after deducting the cost of acquiring vehicles and preparing them for sale — was negative 2%. Yet the deal it announced last month to go public by merging with Ajax I, a special purpose acquisition company, values it at about $7 billion, excluding its cash. Founder and Chief Executive Officer Alex Chesterman will own a 25% stake after the transaction, so he’s poised to become a paper billionaire.
While this validates his decision to list in the U.S. rather than London, it’s an eyepopping number for such a young company in a competitive industry. Lookers Plc, a traditional U.K. car dealer, is valued at 420 million pounds, including net indebtedness.
Cazoo is one of a cohort of online dealers promising to take the hassle out of buying second-hand cars. Customers are offered a fixed, transparent price and the vehicle’s delivered to their door. If they’re not happy, they can send it back, no questions asked — much as they would with a pair of shoes. The benefits of this model showed last year when traditional dealers had to shutter real-world showrooms
While online car sales are great for consumers, I wonder whether these companies will end up generating the profits to justify their elevated values.
Right now investors are eager for more and that’s mostly down to the performance of one dealer: Carvana Co. of the U.S. Its value has increased about 10-fold since March 2020 to $43 billion, or more than 30 times its expected gross profit this year.
Carvana’s boss Ernie Garcia III and his father Ernie Garcia II are together worth about $25 billion, according to the Bloomberg Billionaires Index. That’s despite the company racking up $1.4 billion in losses since being founded in 2012. Analysts expect the red ink will continue for a couple more years.
The companies trying to replicate Carvana’s stock-market success are enjoying ready access to capital. Vroom Inc. raised about $500 million in a Nasdaq initial public offering last June, while Shift Technologies Inc. completed a SPAC merger in October. Mexican used car platform Kavak recently raised $485 million at a $4 billion valuation. Germany’s Auto1 Group SE, whose Autohero brand provides a similar online service, raised 1.8 billion euros in an IPO and is valued at 9.5 billion euros. Cazoo’s U.K. rival Cinch is reportedly eyeing a 5 billion-pound valuation, according to Sky