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Purplebricks: investment bank refutes allegation of bias against agency

A leading business consultancy which advises clients on investments has refuted a claim by a prominent media analyst that it is biased against Purplebricks.

Mike DelPrete, a consultant at media firm AIM, says the Jefferies investment bank is often quoted in the media in reference to Purplebricks.  

“It is usually critical, ranging from a blistering attack on Purplebricks’ sales performance and finances to suggesting Purplebricks should be viewed as more of a gamble than a property services firm” he says in his blog.

DelPrete contrasts that with the bank’s coverage of Countrywide, for which Jefferies acted as sole broker in 2013 when it floated on the stock market. He claims “this fact [its broker role] is never mentioned in any media coverage of Jefferies’ thoughts on Purplebricks”.

On Tuesday Estate Agent Today reported that OnTheMarket’s parent company, Agents’ Mutual, using Zeus Capital to act as ‘nominated adviser’ and sole broker for its proposed float, noting that this was the same company used by Purplebricks for its float in late 2015.

DelPrete concedes that this kind of multiple-client activity - he calls it a “conflict of interest” - is well understood and regulated in the finance industry. “Firms such as Jefferies are legally required to declare any potential conflicts of interest, especially when reports and recommendations are issued for corporate clients” he writes on mikedp, his blog.

But he then discusses Jefferies’ recommendations to investors - buy, hold or sell - between August 2013 and March 2017. DelPrete says Jefferies issued 20 ‘buy’ recommendations for its corporate clients (Countrywide, LSL Property Services and ZPG) during this period; however he claims that in a separate, shorter period, Jefferies issued five ‘sell’ or ‘underperform’ recommendations for “direct competitors of its corporate clients.”

He adds that: “The sustained positive stock recommendations for Countrywide and LSL corresponded with massive underperformance (a 71 per cent and 52 per cent drop in stock price), while the negative stock recommendations for Rightmove and Purplebricks corresponded with a big gain in stock price (60 per cent and 88 per cent respectively).” 

He claims that investors would have lost a lot of money if they had heeded Jefferies’ advice and concludes his blog with this statement: “The data, pulled directly from Jefferies and covering 38 data points over that three-and-a-half year period, raises questions about whether Jefferies favors its corporate clients and may indeed be biased in its research.”

Jefferies has vigorously denied the accusations.

A spokesman from the bank’s New York office told Estate Agent Today: “We don’t publish biased research, we publish honest research founded on facts and performance-based valuations. We hold our entire research department to the highest standards of integrity and we – and our regulators – require them to publish honestly held opinions. That is what happened here and that is what will continue to happen.”

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