Billionaire Andreas Halvorsen is betting big on Cazoo (CZOO) shares. Here’s why.

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Shares of Cazoo (NYSE:CZOO) shares are in the spotlight following a massive purchase by Viking Global’s Andreas Halvorsen. The former Tiger Cub founded Viking in 1999 and today manages over $21 billion in 13F securities. Additionally, the industry veteran has a net worth of around $6.6 billion.

The UK-based online car seller has had a tough year, to say the least. CZOO shares are down around 90% year-to-date (YTD), underperforming the S&P500 Year-to-date loss of 21% by a wide margin. Earlier this month, the company announced that it would end operations in mainland Europe and focus solely on the UK. Cazoo previously invested around $200 million in Spain, Germany and Italy, and formed multi-year partnerships with European sports teams. The company is currently looking for ways to end several of its sports sponsorships.

The closure of operations across continental Europe will result in the loss of 750 jobs, adding to previous job cuts of the same amount. Thereafter, Cazoo will still have around 3,000 employees. Now Halvorsen is stepping in and taking an activist stance in CZOO actions.

CZOO stock: Andreas Halvorsen buys 60 million shares

As of June 30, Halvorsen did not own any shares of CZOO, so the fund manager bought his entire stake during the third quarter. As of September 7, Viking holds a total of 60 million shares, which equates to a 7.3% stake. Halvorsen also disclosed his position via a Form 13D, which means he is seeking to take an activist stance at the company.

Viking has an average holding period of 5.46 quarters for stocks in its 13F portfolio. Still, the fund is likely to hold its CZOO position longer than that due to its activist stance.

At first glance, the online car retailer’s second-quarter earnings look impressive. Revenue reached $327 million, up 145% year-over-year (YOY). On top of that, vehicles sold were up 124% year-on-year to 23,955. However, under the hood was a loss of $238 million for the six months ending June 30, more than the double the $100 million loss a year ago. Over the same period, gross margins fell to a miniscule 0.5% from 4.6% a year ago. The decision to reduce operations in Europe is expected to save around $100 million by the end of 2023.

With margins, gross profit and adjusted earnings before interest, taxes, deductions, and amortization (EBITDA) plummeting, Cazoo finds itself in an extremely difficult situation. Still, the help from Halvorsen and Viking Global is ultimately a positive signal for the struggling car salesman.

At the date of publication, Eddie Pan held (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to Publication guidelines.

Eddie Pan specializes in institutional investments and insider trading. He writes for InvestorPlace’s Today’s Market team, which focuses on the latest news on popular stocks.


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