Analysts have given a frosty reception to the announcement by Agents’ Mutual that it is going to float shares priced at 165p from February 9.
Last year the Agents’ Mutual organisation - set up by high-end estate agencies including Savills and Knight Frank - announced plans to float on London’s secondary AIM market in a bid to raise £50 million, valuing the company at £200m to £250m.
However, the company has now admitted raising just £30m, valuing the group at £100m; some commentators say this means that OTM chief executive Ian Springett, once tipped to earn a reported £20m in shares from the float, may now get ‘only’ £7m or less.
George Salmon, an equity analyst at Hargreaves Lansdown, has told the Press Association: “Backed by estate agents themselves, the launch of OnTheMarket in 2015 was meant to disrupt the duopoly of Rightmove and Zoopla. The group is now the UK’s third biggest portal, but all this really means is that it’s first among the also-rans.”
Analysts at another investment consultancy, Berenberg, say OnTheMarket’s intention to use some of the £30m anticipated proceeds to increase the marketing budget to £25m over the next two years may be insufficient to make a significant impact against Rightmove or ZPG.
“When ZPG was only the Zoopla portal, it was spending circa £20m a year on marketing, which suggests that OTM’s planned spend appears unlikely to make a material dent in either ZPG’s or Rightmove’s respective market shares. Initial support for OTM from its agent partners, however, could see it become a cheaper but smaller alternative, if OTM management decides to price the offering accordingly.”
Berenberg’s analysis is also pessimistic of the effectiveness of OTM’s projected spend on technology - the total says £5m of the anticipated income will go to technical and infrastructure development.
“Given this, we see limited scope for ZPG or Rightmove to lose material website/app traffic or agent partners to OTM” says the consultancy.
And Anthony Codling, equity analyst at Jefferies - which has in the past been hired in an advisory capacity by ZPG, parent company of Zoopla - was equally sceptical.
“The facts speak for themselves. The Initial Public Offering process took a lot longer than it should have done, the company raised 40 per cent less than it originally aimed to and will have a market capitalization less than half of the level the board were hoping for” he says.
Codling continues: “In my view OnTheMarker members may feel short changed. I wish them well, but I think demutalising was a mistake: you cannot serve both agents and external investors. No doubt the investors will be looking at Rightmove’s 76 per cent profit margins and be hoping that OTM’s board start raising ARPA [average revenue per advertiser] as soon as possible.”