Yesterday’s stock market carnage wiped almost a quarter off the Purplebricks share price.
Shares finished the day at 125p, down 24%, after Purplebricks said its UK business was in good shape but that its expansion into Australia and the US would result in revenues below expectation.
Purplebricks also announced the departures of Lee Wainright, its UK chief executive, and his US chief counterpart.
Purplebricks co-founder Michael Bruce is to take over the day to day running of the American business.
Yesterday’s stock market battering at one stage was much worse, with the share price down some 40% at around £1 as the City absorbed the news.
Investment website The Motley Fool questioned: “Is it game over for Neil Woodford?”
Fund-manager Neil Woodford is Purplebricks’ biggest shareholder, with his funds owning some 29% of Purplebricks stock.
The Financial Times says that Woodford is nursing a £32m paper loss, but that he is declining to comment.
The FT report says that Purplebricks was “was founded by Mr Bruce in 2012 after two businesses where he was a director went into administration”. The FT also says there are questions as to how many homes Purplebricks actually sells.
The Motley Fool writer, Roland Head, says Woodford’s shareholding is too big to sell without destroying the share price “so I guess he’ll have to remain patient and hope things improve”.
The same Motley Fool article says that shares in LSL are much more appealing. It says that it has reported good figures in the past, and has strong cash generation.
The piece does not, however, mention LSL’s radical restructure, including branch closures and redundancies.
Axel Springer, the German-based global publisher, is like Woodford also a major shareholder in Purplebricks, but news reports are so far silent.
Last March it invested around £125m in the company, a sum it later topped up.
Axel Springer last March bought shares at 360p, to own 11.5% of Purplebricks’ issued share capital.
The investment included the purchase of almost 7m shares at £25m from co-founders Michael and Kenny Bruce, and non-executive director William Whitehorn.
In July, Axel Springer increased its stake in Purplebricks further, from 11.5% to 12.%, with the purchase of more shares at £3.07 each.
Another issue highlighted by yesterday’s trading update from Purplebricks was whether the business will be in need of new funding.
Yesterday, it said it had £71m in cash, down from the £103m it said it had at the end of last October.
If it continues to burn through cash at the rate of £10m per month, this suggests it will need a significant fund-raise within six months.
https://www.fool.co.uk/investing/2019/02/21/is-it-game-over-for-neil-woodford-pick-purplebricks-after-todays-25-drop/
Comments (37)
“Purplebricks said its UK business was in good shape”…. And then promptly got rid of the CEO. Do I smell something?
Funny that…
>The Financial Times says that Woodford is nursing a £32m paper loss, but that he is declining to comment.
Didn’t Woodford pay about £7m pounds for 30% of the company?
https://www.propertyindustryeye.com/fund-manager-neil-woodford-buys-7m-stake-purplebricks/
Maybe invested more along the way for his stake to be diluted back to around 30% by subsequent share issues.
The market cap. at today’s share price is about £390m.
I’d be surprised if he’s nursing a Paper Loss but could of course be wrong.
If you compare the value of his stake today with it’s value a year ago he, along with Axel Springer are indeed nursing a rather large loss. You consistently defend this not for profit organisation at every turn. Why is that? Shareholder or employee, because I can’t see this ending well for either.
One can only applaude Purplebricks shuddering under the weight of being exposed for what they are.
Next stop Rightmove.
I received my Annual Increase Letter today and I’m composing my “Farewell Letter” to Rightmove.
I have a successful business and Rightmove have now simply priced themselves well beyond their worth as an advertising portal.
I’m dumb for taking so long to see my business life beyond Rightmove however Rightmove are even dumber for thinking that they could simply keep demanding more for a product which is simply no longer worth the money.
I have steadily focused on driving traffic to my own website and that now delivers a quality of enquiry that is far in excess of the self-serving Rightmove.
As I bid you farewell Rightmove I have this final message especially for you ” You f****d me and now, F*** Y** ”
Rightmove don’t realise that they are going to come to a shuddering halt, they are simply too self-obsessed to care about the paying customers they were supposed to be serving.
Good for you!
I did the same last week, for all my branches, I forecast tough time ahead for Rightmove etc. We are all guilty of paying exorbitant fees to these portals and by the way, we also promote them for free, instead of promoting our own brands and websites. Their unbelievable greed will be their downfall and they will be the last to realise it.
Good for you. What started as a trickle is, I suspect, becoming a flood.
Putting aside the low volumes in these “interesting times” Trying to go global within a few years of starting is probably at the root of the problem. They didn’t learn from Tesco or M&S’s or indeed Foxtons foray into the USA and down under it is again a totally different approach to the way we conduct agency here. Had the Bruce Brothers kept focus and a tight grip on the helm in UK, they may have a viable and better business today. As a traditional agent I hate it, but nevertheless can see that the model is sustainable and believe that it still has a future in UK. I feel sorry for the investors who have been carried along – possibly the same that pumped-up the dot.com boom, but Ironically the only long-standing fund manager that I know, has given them a wide berth and only has a token investment – as they do !
>They didn’t learn from Tesco or M&S’s or indeed Foxtons foray into the USA
All still trading in the UK of course.
>Had the Bruce Brothers kept focus and a tight grip on the helm in UK, they may have a viable and better business today.
Possibly but it still seems viable as far as I can see. Given the growth they had achieved in the UK and the dominant position they achieved here by being an early mover and adopting the marketing strategy they did I don’t think you can question them going to institutions and raising funds specifically to get that “early mover” position overseas and give it a try over there too. Always going to be difficult of course.
I reckon in the next few months investors will decide whether to keep investing in the USA. If they pull out of the USA I would still expect the UK business to carry on.
Is it just the British who want to buy everything cheap? Our high streets and travel industry reflect the fact that in the UK all anyone seems to want is to get the cheapest deal. There’s a reason it’s cheap – as Gerald Ratner might once have told you.
Estate agency in this country is already delivered at too low a level cost wise (and often reflected in the quality) certainly in the Noth of the country and the result is that it is not generally done very well. Why are people so disinterested or lacking in understanding that the quality of service they get in the sale of their house is shown on the price they achieve, in what for most people is their biggest asset. Nonetheless they want to get the job done for nothing – pay peanuts …………
Probably because the cost of living is so high.
The FT report says that Purplebricks was “was founded by Mr Bruce in 2012 after two businesses where he was a director went into administration”.
I never understood why the city backed the Bruce Brothers in the first place, normally they would have insisted on their own men “pulling the strings” or certainly have shafted them after a couple of years.
When will NW/AS pull the rug?
Let’s hope none of the big investors are of Sicilian origin, they may not take too kindly to having been taken for a ride.
Look out for the “go fund me page”, so that the LPE’s can afford their Easter Eggs!
Local Property Egg-sperts?
I suppose PB will also blame Brexit..
Reading the above means PB will go into liquidation within 6 months. As I cant see anymore funding going to them.
In situations like this, the main operators usually start extracting funds by various means. (I am not implying anyone at PB would do that.)
Like taking a CEO position with an extra salary?
Don’t forget they will still be bringing in revenue on top of their existing cash, so that will buy them another 2 to 3 months by which time we will be in November where their listing revenues will drop further. Without further inward investment its hard to see how they can keep afloat into 2020
They have been bringing revenue in and still burning through £10 mill a month
They will merge with a high street corporate estate agent before that happens.
Wouldn’t it be fun if RQ took the vacant position of PB CEO UK
Kiss of death?
You could put Sir David Attenborough at the helm but unless they can find at least 1000 SLF’s (and only SLF’s) who are content to concentrate on a genuinely #local patch they know intimately where they are known and trusted by the selling public and who are prepared to be self employed earning less than minimum wage by the time all the hours of commitment are taken into account it is not going to happen.
Corporate office closures will provide a queue of agents who could now become LPEs, the problem those good manager valuers will face is the model itself and the reputation list it and leave it agency has given itself. Additionally why would anyone good enough to win instructions against strong #local competition work for about 25% of a fee they have no control over?
A Ewemove franchise is a far more palatable option for the sort of agents this model needs to be credible and eventually succeed though I am not sure the investors will or can hang out long enough for that to happen
Other people’s money!!
Before the nay sayers start, dont expect any sympathy from us. This company has used other peoples money to trash proper estate agents and make what good estate agents do seem run of the mill. Now that the other peoples money is running out and the share price has collapsed so badly other investors will be very wary, what do you do next.
Also what has happened to Kenny Bruce, is he no longer involved, never hear anything from him.
This gif sums it all up rather well https://media.giphy.com/media/NDzYciTuZlOFy/giphy.gif
Investors who were told all LPEs were qualified, LPEs who were promised riches with additional share options, customers who were told they had an 88% or higher likelihood of selling (completed) but, in fact, have a coin toss gamble with an average £1,100 of their hard earned money.
Not forgetting the ‘Trust’ pilot shennanigans, coming off social media, commisery, etc etc.
The PB Peterborough branch falsely stating they sold a lot of properties in 7 days in September 2017 when at least one had been sale completed in the previous May – tweet & Twitter account swiftly deleted
Had a small child cried out “why is the emperor not wearing any clothes?”
A lovely song, written by Gladys Harris, sung amongst others, by Nat King Cole…. titled, “The Party’s Over”.
How apt….
“The party’s over
It’s time to call it a day
They’ve burst your pretty balloon
And taken the moon away
It’s time to wind up the masquerade
Just make your mind up the piper must be paid
The party’s over
The candles flicker and dim
You danced and dreamed through the night
It seemed to be right just being with him
Now you must wake up, all dreams must end
Take off your makeup, the party’s over
It’s all over, my friend
The party’s over
It’s time to call it a day
Now you must wake up, all dreams must end
Take off your makeup, the party’s over
It’s all over, my friend
It’s all over, my friend”
Morning GPL – how apt. Any chance of you actually singing it on utube? Go on, please – and dedicate it to Axel Springer and Neil Woodford.
“so I guess he’ll have to remain patient and hope things improve” ??? in 2016 I remember a story on here about Purplebrick closing in on 3000 listings a month in order to be profitable. They have just had 12 months proper leadership in the UK under Mr.Wainwright yet the registration numbers for the traditional daffodil spring are still hovering at 3000/ month.
I can’t see how things are going to improve; the TV advertising, the rugby sponsorship, the Axel Springer investment of cash and expertise is not having a tangible effect on listing numbers. With so much at stake and burning £350,000 a day either something has to change very very quickly or common sense has to prevail.
The only surprise for me is just how long the inevitable is taking
Countrywide’s woes last year will have been enough to convince investors that disruption has finally broken traditional agency and that will have bought them a few more months.
Share price is stabilising and rising again today 🙁