An equity specialist has warned that shareholders may now choose this is the time to sell their stakes in Purplebricks because “there is a risk that its hefty valuation will not live up to its much-advertised hype.”
Michael Allen, an equity specialist contributing to financial news service Proactive Investors, writes that “since trading at peak in July, the shares have gradually drifted lower ... Purplebricks claims to be the best-reviewed estate agency online, but if it is not selling homes, there is a risk that its hefty valuation will not live up to its much-advertised hype.”
Allen’s reference to not selling homes follows an analysis some months ago by another financial specialist, Anthony Codling of Jefferies, who calculates that between November 2015 and March 2016 only 14 per cent of homes listed on Purplebricks in three sample areas - Bournemouth, Southampton and Birmingham - had actually completed.
Earlier this week Allen told Proactive Investors that with regard to Purplebricks “at the time of writing the share price is 132p and I foresee further weakness ahead.”
Yesterday it rallied very slightly to close at 133.50p, up 0.50p on the day.
“The question that will become increasingly important for shareholders is ‘how many of its homes that it is listing has it sold?’. Unlike other estate agents, this is a fact that Purplebricks elect not to disclose” says Allen.
“Its business model encourages instructions, as customers are able to pay only on completion or after 10 months, so why wouldn’t you ‘try it’?” he adds.
Over the summer Purplebricks launched in Australia with a marketing spend said to approach £10m.