The used car marketplace operator’s chief of staff Aaron Kee claimed on Twitter the allegations of a government bailout were “categorically untrue and badly misrepresented”.
However, he acknowledged that Carsome “did reach out to the government”.
“But that was in response to an engagement session to encourage and welcome the participation of Malaysian institutional investors in our path to an initial public offering (IPO).
“It was an offer, not a request,” he added.
In the letter to Sim which was sighted by FMT Business, Carsome said it hopes the ministry of finance (MoF) “can strongly recommend” the country’s sovereign wealth funds, government-linked investment companies (GLICs), and government-linked companies (GLCs) participate in an external fundraiser totalling US$10 million (RM46.18 million) later this year.
The letter even went as far as naming the funds that the MoF could recommend – Permodalan Nasional Bhd (PNB), Khazanah Nasional Bhd, Employees Provident Fund (EPF), Armed Forces Fund Board (LTAT), Kumpulan Wang Amanah Persaraan (KWAP), Petronas Ventures, and Sime Darby.
Carsome suggested to Sim that GLICs were “overshadowed” by foreign investors when it came to investing in the group. The letter said though Carsome was a “Malaysian Unicorn”, currently less than 10% of its “cap table” comprised investment from Malaysian government-linked investors.
“This is far overshadowed by the enthusiasm and support from foreign-owned funds,” it added.
In the coming month, the group will be conducting an “internal bridging round” for US$45 million (RM207.8 million) involving its existing investors including Qatar Investment Authority and Temasek-backed investors 65 Equity Partners and Seatown Holdings. Temasek is a Singapore-owned investment firm.
To emphasise it was not in financial straits, Kee claimed the group has more than enough runway to get to breakeven point by this year.
“Carsome’s business model remains sound. We continue to transact tens of thousands of cars per month across Southeast Asia,” he stressed.
The company’s liquidity position remains strong at US$150 million (RM692.71 million), according to a group statement on June 8.
In a recent interview, co-founder and CEO Eric Cheng said the group is hoping to break even in the second half of 2023.
Carsome cash burn-out?
While Carsome has denied the bailout rumours, the fact that it has yet to break even may lead some investors to assume the group is looking for more money.
After all, it has bulldozed through 12 funding rounds, raising some US$607.4 million (RM2.81 billion) via 26 investors in the eight years since its inception in 2015. A large chunk of the money – US$290 million (RM1.34 billion) – was raised in its most recent funding round in January.
In 2021, the group posted a revenue of US$655.9 million (RM3.03 billion). However, it only managed a 5.5% gross profit of US$35.9 million (RM165.8 million).
After accounting for non-cash flow related losses, the group closed 2021 with a net loss of US$138 million (RM637.15 million).
Cash used in operating activities was a whopping US$114 million (RM526.34 million) in 2021, implying a nine-fold increase in operating burn from 2020.
Carsome accelerated its spending in 2022, as evidenced by their Eric Cantona (ex-Manchester United football star) marketing campaign, reported to cost US$28.7 million (RM132.51 million).
A detailed breakdown of its financials is not yet available, but the group claims to have increased revenue by 250%, achieving operational profitability for the first time in the first quarter of FY2022.
IPO still up in the air
Known as “Malaysia’s first tech unicorn” – a startup company with a US$1 billion (RM4.62 billion) valuation – Carsome has had quite the build-up ahead of its IPO.
The company was expected to list on both the US and Singapore stock exchanges with an estimated valuation of US$2 billion (RM9.23 billion).
However, Bloomberg reported in June last year that Carsome was delaying its dual listing due to deteriorating macroeconomic conditions which could dent its valuation.
A look at its regional peers reveal the industry as a whole has been taking a beating since then. In March this year, India-based used car marketplace giant Cars24 pulled out of Indonesia and Saudi Arabia, saying it needed “deeper focus”.
Indonesia’s Moladin laid off 11% of its workforce. In January, Netherlands-headquartered OLX Auto downsized, booting 30% of its Indonesian workforce.
Even Carsome has had to make layoffs, cutting 10% of its staff in September last year. The rest had to take a pay cut while senior management were willing to forgo salaries till end 2022.
Interestingly, the letter to Sim did not mention when or where it planned on listing, but said the funding rounds along with participation from state-linked entities, “will be key in determining Carsome’s future direction and investments locally”.
Only time will tell if Malaysia will get a mega IPO with a valuation of almost RM10 billion coming to its local bourse.