Neil Woodford, the hugely successful fund manager, has bought a 30% stake in online estate agency Purplebricks for £7m.
It means that the five-month old firm, so far not launched out nationally, is valued at over £21m. The firm launched only in April.
The company is already backed by former Capita boss Paul Pindar.
Man with the Midas-touch Woodford spent 26 years at Invesco Perpetual, where he controlled over £15bn worth of assets before leaving earlier this year – to the shock of many in the City – to set up his own fund management firm, Woodford Investment Management LLP.
At Invesco, he ran the best-performing fund in the equity income sector – turning a £10,000 investment into £230,000.
His investment in Purplebricks is his biggest bet on a private company since launching his own firm three months ago. In May, he invested in communications group Daisy and his 4% stake looks like paying off, to the tune of £2m if a deal goes through – as seems likely – valuing the shares he bought at 170p are now worth 190p.
Purplebricks is run by brothers Michael and Kenny Bruce, formerly of Burchell Edwards estate agents in the midlands.
It charges a fixed sale private upfront of £599.
As reported in Eye, it is now recruiting commission-only local agents in the midlands for its next phase of expansion. It launched in the south-east in April.
The firm uses a call centre in Southend.
Woodford clearly believes in the Purplebricks business model, telling the Sunday Times: “The vast majority of property searches take place on the internet, and a business that provides a virtual offering without expensive high street offices can significantly undercut the market.”
Comments (11)
i don't get how it can be so valuable, its showing just over 600 properties and at there fee of £599( which is now showing at £665 no sale no fee method which has changed) so a new company with 600 properties say at £599 plus a couple of add on say £699 per unit = @419,400 gross. Given all the faces they show on the website need to be fed etc – wheres the profit and value – beats me maybe someone can shed some light
There are several big flaws, fees are way too low to be viable, new recruits therefore on comm only if worth anything could do far better in a more traditional agency model. Service can't be as solid as a local agent when a viewing needs doing at 10-20 minutes notice. AND the big flaw must be when proper agents kick up a fuss that the budget boys are removed from main portals. Portals are really biting the hands that feed them.
And as many VC's know for every 1 good deal theres 10 not so good which PB is a bad agency model.
£21m for a new start up that's missed all it's projected targets, has had to offer people a 'money back guaruntee' if they do not sell their property and has had the fortune of launching during a property bubble. A perfect example of having more money then sense.
Given reports of his net worth I'm sure £7m is no more than a "punt" for him, but one has to really question the valuation this implies. For most estate agents the lion share of the value of their business lay in the guaranteed short/medium term repeat business i.e. lettings. From what I can see PB have very little. For internet companies it surely lay in the volume of traffic driven to their website and they don't have that either. Given the "emporers clothing" city appeal aspect to many of these online only agents, Mr Woodford had better have a plan to get in and get out quick, in my humble opinion.
I agree whole heartedly. For any busness with very little market share it seems a hefty punt! Would like to have seen them in the "Den" pitching that valuation to the dragons!
Mr Woodford has clearly been very successfully in his stock market dealings so far, but there must be question marks over the future of internet only agencies. The transactions ie. after agreeing the sale, are becoming problematic and need a lot of personal attention and if the market hardens, will become more so. Most parties in a transaction like to be able to talk face to face with a person and further, they wont be able to advertise on Onthemarket, when it comes on line in January. We will watch the performance of his investment with interest and the revaluation, this time next year.
Cardiff Ageny you say "Most parties in a transaction like to be able to talk face to face with a person"
Really?
Is so I assume you renew your car and home insurance 'face to face' with high street insurers, book your holiday and flights with 'face to face' with a high street travel agent and buy every other big or little thing 'face to face' with high street retailers and rarely – if ever – purchase any of things online. I bet that it absolutely NOT the case.
I run a local estate agency that is located on a local business park and not on my local high street – in every other sense I am exactly the same as the local high street competition. A minute fraction of buyers and sellers come into our office for 'face to face' meetings – 99% of them find that phoning us is far more convenient and just as effective.
And – we are the fastest selling agent in our area borne out by the average listing times shown on Rightmove and Zoopla.
The amount of personally biased opinions expressed as 'facts' by high street agents to condemn online only agents only serves to delude the utterer themselves.
CP Are you a local "internet agent" or a national one? reason I ask is I can see how a model works for a local as I am guessing other than a shop window you do the same job, accompanied viewings, sales chase, and receive your fee at the end of the transaction. However a national will not offer any of the above (they will dress it up like they do).
Smile Please – we are a local agent but my point was that whether local or national online or high street clients do not necessarily prefer face to face – especially those who are specifically searching online for online estate agents – they have already made their mind up that they don't want to pay high street fees.
As soon as one of the major online agents – be it Emoov, Stelios's new agency or ANO goes on national TV (which they will) and educates the public about online agents v high street the interest and willingness of Joe Public to use online will rocket.
Any high street agent who thinks otherwise is living in cloud cuckoo land. It won't be the death of high street agents though – but it will be the start of the death of Joe Public paying high fees.
THAT is the real threat from online agents.
Think what Cardiff agent means (I may be wrong, if so sorry Cardiff!) is that they like to deal with somebody that knows what is happening with their case and have a meaningful conversation and update unlike the "bucket shops" they do not progress a case they just field a call. On a different train of thought…. What do you charge your vendors, up front or end of sale and is it fixed fee or percentage. No motive behind the question just intrigued. I think that local business park agents are on the increase and could be a viable idea in the future just wondering where you pitch yourselves?
Another "Analyst" that does not understand agency.
“The vast majority of property searches take place on the internet, and a business that provides a virtual offering without expensive high street offices can significantly undercut the market.”
No it saves maybe a few thousand a year, The online agents are not interested in selling your property so they take your money upfront and run. The saving is on staff. If Neil Woodford makes a "Profit" on this investment I will be more than surprised.