Alex Chesterman, , the founder of Cazoo, will see his shareholdings in the company nearly wiped out when bondholders seize control of the online car seller.
Cazoo bondholders agreed to swap their debt for shares of the company. Existing shareholders will only own 8pc after the transaction.
The dilution reduces Mr Chesterman’s current holding from 24pc down to less than 2pc.
The company announced in a statement that holders of Cazoo’s $630m (£503m), debt will receive new $200m bonds and shares, “which will constitute 92pc”, of the stock of the company.
The company is trying to improve its performance and cut down on debts. At the end of the last year, had borrowed £649m.
Shareholders will have to approve the deal during a Tuesday meeting.
Stockholders of Cazoo have already seen the value of the company plummet by more than 99pc since its IPO on the New York Stock Exchange, in 2021.
Mr Chesterman who founded LoveFilm, Zoopla and Cazoo, established the online car dealer Cazoo in 2018. He grew this company rapidly, before it was listed on the stock exchange via a Special Purpose Acquisition Company (SPAC).
a loss-making business is under pressure due to the rising interest rates and increased competition from competitors who have copied ‘s online sales model.
Cazoo announced last year 750 job reductions and a quick retreat from its new car leasing business.
The company sold its Italian and Spanish operations and shut down its French, German and Austrian operations. This ended a grand scheme to dominate European online second-hand auto sales.
Mr Chesterman, who stepped down from his position as CEO in January but remained as executive chairman, has resigned as Chief Executive Officer.
Paul Whitehead, the new chief executive of Cazoo, has sought to reduce cash burn to improve performance. Cazoo’s October update revealed that the company had £151m cash compared with £195m just three months before, and could end the year having as little as ££100m.
Cazoo warned that New York Stock Exchange threatened to remove the company from its list if the share price did not improve.
According to the rules, a company’s stock must be valued at $1 or more. Cazoo is currently trading at 35 cents a share.
The company’s current value is $14m. Cazoo will be valued at $8 billion when it lists in the US by 2021.