Countrywide’s £140m cash call has been labelled “iniquitous” by the Sunday Times.
Financial columnist Sarah Meddings accused the company of treating its small investors as “second class citizens”.
Shares are being placed at just 10p – a “whopping 80% discount”, says Meddings, on the 50p that Countrywide’s shares closed at the afternoon before the call for emergency funds.
Meddings says: “A bargain you might think. Only for some. Instead of a rights issue – which would have treated all shareholders equitably – Countrywide announced a share placing.
“What’s the difference? In this cash call, only ‘qualifying’ institutional shareholders were able to maintain their position.”
Meddings says the placing “looked suspiciously like it was tailored to favour dominant shareholder Oaktree Capital Management” and two undisclosed new blue-chip investors, leaving smaller shareholders to fight over the open offer of £28.6m shares.
She says that even if small shareholders do take part in this, their holding would be diluted by 67.9%, while those who do not take part would be left nursing losses of 85.3%.
Meddings says that Countrywide’s directors and managers “missed the memo about being ‘all in it together'”.
They, she says, were encouraged to take part in the cash call on the same terms as the big institutions, and suffer no dilution.
Meanwhile, she says, a long list of bankers, advisers and lawyers shared fees of £11m.
“Lucky for them,” she concludes. “For small investors, Countrywide’s iniquitous cash call leaves a bitter taste.”
On Saturday, the Mail labelled Countrywide executive chairman as its “zero” after the cash call saw shares plummet 60%. It said: “Long’s having a right old time of it lately. He’s also chair of Royal Mail, whose boss Rico Back’s pay was recently rejected by shareholders.”
Ironically, it named as its “hero” David Cutter who is boss of Skipton Building Society, for being the only lender so far to say it will pass last week’s 0.25% interest rate rise on to savers in full. Skipton Building Society owns one of Countrywide’s main rivals – Connells Group.
Both Countrywide and Connells, along with Purplebricks, are currently claiming to be the UK’s largest estate agent. Connells made the claim, for the first time, in its results last week; Countrywide says it is the biggest by branches; and Purplebricks says it is the biggest by listings.
Countrywide, which published its share prospectus on Friday, starts today with its share price at 16p and a market cap value of £44m – about £100m less than it is trying to raise.
By contrast, shares in Purplebricks start the new week at 300p and a market cap of over £890m.
The timetable for Countrywide’s emergency rescue is short: applications to invest must be in by 11am on August 17; the results will be revealed on August 21; a general meeting to rubber stamp the results is due to the held on August 28; and the new shares are due to begin trading on August 30.
Comments (33)
Why could they not have gone for a full conditional placing and open offer, as Mothercare have just done? It might have been 6 for 1 @ 10p, which would probably have been too much for some existing shareholders to stomach in full, but at least they’d have had the opportunity.
Any shares not subscribed for could have been distributed to qualifying shareholders who applied for excess allocation.
Only then would the conditional placees get a look in to mop up any remaining shares.
No, this is looking after the interests of major investors at the significant expense of the private investor.
CWD will survive. They have many fingers in many pies. Many more than most realise.
That market cap figure of £44m at a share price of 16p is wonky. You can’t talk about the £129m the company are raising (£140m less £11m in useful fees to the City) without including the 1,400m new shares being issued at 10p.
The market has already factored in the dilution from the new shares, hence they’re trading at 16p. At a share price of 16p that equates to a market cap of about £262m, which is somewhat more than the £44m mentioned in the article! In other words, £133m on top of of the £129m they are raising.
Last week, prior to the placing/open offer announcement, the market cap was about £119m. You could regard the extra £14m as the ‘gosh, they’ve survived’ premium!
Clearly the least profitable or losing branches will be (or are being) shut in each location. If they are profitable then sell them. In my town they have about 4 different lettings brands (having purchased recently). Surely these need only 1 brand and 1 location.
Clearly the losing branches should be shut in each location. If they are profitable then sell the least profitable where they have multiple branches.
Wouldn’t be surprised to see the commercial side & best residential brands sold off giving the big shareholders a bigger piece of the pie than they would have had before the capital raise.
With a rights issue and an accompanying announcement that the larger shareholders would be taking up their rights, smaller shareholders would have followed suit ensuring a fair sharing out of proceeds.
Have they not been trying to sell the commercial side for a while ?
Maybe the surveying arm as well?
Doubt it the surveying arm is reliant on the mortgage side of the business.
Anyhow while you are on fancying answering the question I asked a week or so ago ?
What was the question?
He claimed to “know” the vast majority of the turnover in LPEs was new starters who lasted less than six months. I asked him if he put that down to recruiting the wrong people or the new starters being given an unrealistic impression of the job ?
Not earth shattering but it makes me laugh how he just totally ignores anything that could possibly show PB in a less than glorious light.
But isn’t that exactly what AP was doing?
Completely agree that that there is no need for multiple brands next to each other on the high street but which ones to cull? Which leads onto the question of , why so many brands?
Brands by their very nature will appeal to different consumers/sections of the market, so in theory having multiple brands should allow you to take greater market share in any given area.
I would have thought the best way forward is to go to one branch per town and one brand throughout the country, would be able to advertise on TV, Radio, Newspapers etc.
Here ‘oop North (North East to be exact…) they inexplicably adopted ‘dahn Sarf’ brand Bairstow Eves originally. It looked to all intents and purposes like something the Third Reich had dropped overnight on an unsuspecting region – the best thing they ever did was to change the font for their logo!! Someone somewhere then decided to swap to Bridgfords – another unknown anywhere north of Scotch Corner or right of Carlisle. I would say that as a result, the ‘brand’ of Countrywide lost identity massively. That – and the fatally flawed franchise *********** (credit: Jonnie) exercise – made a once-large force roll over and play dead.
Don’t get me wrong – all the old bad habits remain… just no-one now knows who they belong to!
Daft thing is that simply using the brand “Counrtywide” would have probably benefited them massively.
Because each of the brands has a historic value. They have some very strong #local brands with strong #local history, that means vendors can find the agent who sold them their current home or did will selling their previous home so they could buy the one they’re in now.
It’s history, it’s goodwill and they’re valuable
I agree but given the turnover in staff I dont feel its as valuable as it would be for an Independent. Buy a house from a countrywide brand and in five years when you are thinking of selling there is very good chance there is no one there from when you bought it.
In my opinion the loss of Goodwill and name recogniton would be more than ofset by cost savings and getting a coherent message out across the whole country about who they are and what they can offer.
Anyhow glad I got out when I when I did.
If you were a good branch manager or senior neg with your career prospects looking either gloomy or mauve but you had a chance and the support to rebuild a branch and rebuild a creeer that’s suddenly freed up of blockers to your career path surely you’d take that as an opportunity? I would.
If the good people come out and start their own business, there is no minimum wage and even the cheapest route to a secure business is expensive. If you are in a corporate agency and have a chance to be as good as you can be you would have to be one heck of an independent to be able to draw the sort of salary you can as an employee.
I learned very early on in my first career, promote your boss, they’ll take you with them!
I agree, Robert – but as I have stated above neither of the brands chosen for my neck of the woods had any historic value to local people.
One of their first #fails, I would suggest.
Probably because not many people realise that the different brands are actually the same company at the end of the day. So if a town has both a Shipways and a Connells, they have two chances of getting the business, rather than just one.
It’s like baked beans. If you have 6 tins of beans, and three of them are made by the same company, just with a different label, then that company has a 50% chance of making money.
When i used to work at Countrywide it didnt really work that way. I would guess that in most towns where they have two or more brands the total “Countrywide” stock would not make them number 1. What they are doing isnt working, in my opinion they would be better of focusing on one brand and marketing that brand properly but you know what they say about opinions.
The way things are going both the big guns and cheapskates will fall.
There’s nothing special whatsoever about Countrywide and big ‘on line onlys’ will not stand the test of time based on no meat on the bone for investors and a generally diabolical line of communication for customers.
Only those offering a full efficient service and managing to do so with low overheads will survive.
I think you are right on the sales side,
Lets not forget though they are the largest introducers of mortgages in the UK, massive surveying business and a very large lettings book.
I think they will survive although their offering will look very different in a year to 18 months time. The simple reason is they do not need multiple offices and brands in towns when one office can service an area three or four can.
Good point.
But the vast majority of their financial services was office introduced, Without the offices and the targeted negs how long can that carry on?
You would be surprised at the size of their re-mortgage team.
The industry as a whole will suffer if Countrywide falls…. there is a place for online and hybrid, but they will fill the void quickly if the big guns fail, thus diluting the service and reducing its offering to that of a mail order catalogue….
Sorry am I missing the point, the people with the most to lose if Countrywide collapses are who? Small new investors who want to grab a greedy bargain or those who have quite a lot at stake already and have had for quite a while.
There are either two thing going on here, someone wants to discredit the board (its the second such story in a week) or there is so much confidence the board will recover the share price the story is driven by pure envy.
I dont think anyone wants it to collapse, i think as the author pointed out its wholey unfiar to allow the institutinal investors to have priority at a share offering of 10p when the sp was 50p and allow the small private investors to fight it out over the reamaining 10p shares (which most will not get)
A rights issue would have been far more fair, I am guessing they did not do that as Oaktree were nervous that the business would not perform and they could lose further.
The ironic thing is given the current bad will they may be luck if the sp does not drop below 10p!
I can think of one bloke who wants it to collapse to a price he can afford it ( albeit with a little help from his kids’ piggy banks)
Given the circumstances what were the chances of finding 140,000 £1,000 small investors especially with the press and sentiment against them? Fairly slim I would have thought and so would everyone else involved. My guess is if you’ve £140m in those circumstances you get to dictate the terms
“The ironic thing is given the current bad will they may be luck if the sp does not drop below 10p!”
Sorry, but what on earth is this sentence supposed to say?
Ooops sorry guys deleted my post as it was incorrect and it appears to have deleted other posts. Lesson learnt.
Ha Ha!
Sorry for clarity it should read:
“The ironic thing is, given the current bad will, they may be lucky if the sp (share price) does not drop below 10p!”