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TODAY'S OTHER NEWS

Purplebricks share price loses almost 25% of its value since flotation

Purplebricks, the online agency that floated a month ago at 100p per share, was yesterday down to 75.0 at one point before rallying very slightly at the end of the day.

It closed at 75.50, some 24.5 points off its original 100p share price under five weeks ago.

Purplebricks’ initial valuation, at £240m, raised eyebrows across the industry. 

Almost as soon as it started trading on the Alternative Investment Market on December 17 its price appeared to lack the confidence of many investors and it closed that first day down seven per cent at 93.0p. 

Although it rallied early in the New Year, ending January 5 at 99p, it’s been downhill most of the way since then with the biggest drops of 5.5p on January 7 and 6.0p on January 14. 

During the same period the wider FTSE 100 has also fallen, but by less than 2.5 per cent in the same period: it opened on December 17 at 6,017.8 and closed yesterday at 5,876.80.  

Early this year the so-called ‘star’ fund manager Neil Woodford increased his stake in Purplebricks to more than 25 per cent - but even at that point the company was valued at around £100m, far short of the flotation valuation. However, even at the current depressed share price, the firm would be estimated at being worth around £180m.

The company is thought by some to be the fourth-largest estate agency in the UK with a 60 per cent market share of new online instructions.

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    so-called ‘star’ I think the author should keep to writing books and tit bits , I'm an high st estate agent "quite large" nothing wrong with competition, this to keep your readership happy ? ,
    what has happened to Journalism ..

    Fake Agent

    Eh? What are you on about?

     
  • Glenn Ackroyd

    Star fund manager lost his investors £32m with his recent biotech - So losing £60m in market cap means he's consistent - http://www.thisismoney.co.uk/money/markets/article-3344940/Star-fund-manager-Neil-Woodford-says-120m-punt-biotech-firm-come-good-despite-estimated-32m-loss.html

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    It's easy to pick out dud investments from any fund manager no matter how good or bad they are. Woodford lives by his reputation, his Invesco Perpetual High Income Fund for many decades outperformed both his peers and indices.

    Purple Bricks is an innovative company, perhaps it has been overvalued by having the Woodford association - but there is no doubt that traditional estate agents should be worried. When you charge £6-£10,000 for putting up a few billboards and advertising on an national online portal such as rightmove, people start to question what exactly you do for your money !

     
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    I think it's fair to call Woodford a so-called 'star' fund manager...I mean that's what he is, isn't he?

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    Also - I don't understand how anyone could ever get even close to believing that this is true?

    "The company is thought by some to be the fourth-largest estate agency in the UK with a 60 per cent market share of new online instructions."

     
  • Fake Agent

    Indeed, T Dap, I think that's a fairly massive exaggeration from those people. I'd be very surprised if it were the case given how big some of the major high-street agents are, with hundreds of branches, overseas operations, mega PR teams and thousands of staff.

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    Yes but didn't you know PB has 'local property experts' all over the country?!

     
  • Sceptical As Always

    oh no, an online agent gets their valuation wrong? you don't say...

  • Richard White

    I think a lot of investors feel that the only thing holding our economy together is the housing market and if that begins to sag, the whole thing is going to fall apart and the likes of PB and many others will become just another footnote in the history of the markets.

    The FTSE is 3% off again this morning and we have a situation worryingly reminiscent of 2007. As a financial adviser who manages client money, I feel the pain of the fund managers.

    The PB share price decline is not just a result of its stupid valuation. It is partly a result of the 'dash to cash' we are seeing as investors bail out of riskier assets. I'd even venture that were we not in the grip of this China-led panic, the PB share price might even (ridiculously) have gone up. If China and the emerging markets default on their enormous debts, we'll be in the middle of another credit crunch before you can say 'local expert' and then you'll be able to wave goodbye to 2/3rds of the agents in the marketplace.

    The PB share price is largely a by-product of a much bigger and potentially horrible situation that is beginning to play out across the world.

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    I think the investors are deluded and have bought into a dream, how can a company that has lost millions be worth 250m!! Have a look at the directors and how many failed business' they have, JKM property solutions etc... The top two companies in estate agency make around £100 and spend a fraction on advertising. The company cannot make a profit spending the type of advertising they have done (which they need to do) and make a profit. Watch this share price drop through the floor.

  • Lord Elpus

    I think it's time to stop reporting on Purple Bricks.

    The valuation of £240m was stupid. We all knew it was stupid and it's been proved so.

    There's no need to tell us the same thing every bleeding day. We've heard it. Move on.

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    As I said earlier, if Purple Bricks are doing anything its highlighting how much bricks and mortar agents are overcharging their customers - as house prices seem to know no bounds at the moment. A house that this year has increased in value by 50% over the last 3 years doesn't cost 50% more to sell!

    Terence Dicks

    At least most high street agents do not charge a fee regardless of whether they sell or not Sanjay, as do PB. Do your homework before you write us off, and try to stop living in lah lah land.

     
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    Terence, the properties down this road sell for £650,000 on average. By my estimations a local agent would charge in the region of £6-£7k for what? Listing the property on an established property portal, having the property details displayed in their shopfront , valuing a property, arranging for viewings, liaising between seller and buyers (solicitors, surveyors etc) and probably not a lot else. So is the agent likely to be doing much more than 40 hours work for each sale, doubt it somehow.

    My alternative is to use a company like purple bricks and pay an up front fee that is much less than 30% of the cost of the bricks and mortar agent, hell yeah I will take a punt for selling my house and keeping the best part of £5k in my pocket.

    Sometimes I think it's the estate agents that live in la la land. No professional qualifications, no regulator with a bite but an eye watering fee for not a lot of work. Nice if you can get it!

    Going back to Purple Bricks and its sad that the only commentary on this company on the internet is on an estate agency website. No surprise people don't want this company to succeed ehh! I genuinely think this company has something to offer a market that still lives in the dark ages, and will look to pick up some shares around the 50p mark.

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    Sanjay you are clearly living la la land. Firstly a "local expert), lives 12 miles from my patch - that is not local in anyway. I am surprised Advertising Standards have not looked into it, as local is a matter of conjection, however, you do need to really know the area, to inspire confidence from a buyer.
    Lets divide your 40 hours by 3 (as one in three properties placed on the market actually sell). Do most agents spend 13.3 hours on a sale transaction - probably as communication is the most important key to get a transaction through.
    I actually want the onlines to have a great year or two, the populous will then realise why they pay the agents and when they do eventually all go, then the high street agents will be back to a usual 2% + VAT, rather than the 1-1.25% that the majority charges.
    I am rarely wrong when it comes to the predicting the future of the property market and this one will come true!

     
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    Daniel, a local accountant charges up to £150 per hour for his expertise. An IFA similar levels. What expertise does a local estate agent offer?

    Having local knowledge doesn't justify the price tags your profession commands. Essentially selling a property for £300k is no different to selling one for £700k. So why is the fee a % of the value rather than a fixed fee dependant on the property value?

    Only when Estate Agents come into the professional world, have formal qualifications that verifies their levels of expertise and there is a regulator that holds unscrupulous agents to account for any unethical behaviour, can they have the right to charge a fee that is reflective of a professional status. Quite frankly I don't want to and wont pay a ridiculous amount to a salesman who can talk a bit.

    When the average man in the street realises how poor value for money estate agents really are companies like purple bricks (and there are others out there too) will thrive.



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    I do agree agents need to be qualified (like I am) and this is something that has been requested for eons by agents, so we have no choice but to self regulate until it becomes imposed on agents. Be interesting how quickly the online agents change their manner.

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    The reality is the general public are using online agents more , having lost alot business because, many of my customers asked, why I'm charging commission ??. Online agents are just as qualified because most of them are ex high street agents , I think I'll be moving over to the online , sooner rather than later ,survival of the fittest , business is business . I don't want to end up as a Blockbuster or Woolworth store . Savills and Knight Frank (self promoting themselves on OTM at the expense of the independent agent ) have irrevocable and paradoxically damaged , forever tainted our image of the estate agent.
    This foray into on the market , bloody portal ! . which is costing be a fortune for nothing ! I am ditching OTM , NO ONE is taking my business under !

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    James, you can say all you like about Purple Bricks but the fact is that one of the best performing fund managers in the country over the last 20-30 years (Woodford) has put his money where his mouth is. He will have done a serious amount of due diligence to throw the best part of £70m at the company and take a 30% stake.

    He (Woodford) will have a serious influence on how the business is run going forward.

    The fees agents charge have been reduced because house prices have gone through the roof over the last 20 years disproportionately to the real rate of inflation. There is no way the upper levels you have quoted could be justified in todays market, especially in the South East.

    You talk about regulation, look at the barriers to entry for both IFA's and Accountants. I think you will find the regulation placed on Estate Agent's is nowhere near as rigorous as the aforementioned professions.

    Put this into perspective, I worked for an accountancy firm who wouldn't charge an SME anywhere near the fees for filing an annual tax return that a London Estate Agent would charge someone for selling a pretty standard property. Same for setting up an running employee benefits package for a firm that employs 20 people. I just think the estate agent profession needs to have a serious reality check, look at what you charge for what you do and it is totally out of kilter.

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