Before we go any further, assuming you are an Agents’ Mutual member, let me ask you a question. If you had been made this proposition two years ago, to support a for-profit portal, committed to increasing fees, where corporates pay less than you and get more shares than you, and where Ian Springett gets £20 million, online agents can list and so on, what would you have said?
To help you make your decision on the upcoming member vote on demutualisation, let's review what's on offer both in terms of shares and the new business proposition…
My understanding is the new OnTheMarket will be offering shares as follows:
- New agents will get shares for nothing and free listing for 18 months
- The current board will receive a substantial shareholding
- 27% of the shares in the new company will be issued to new members
- Shares could be substantially diluted in the future
- Shares will be locked in for five years but 10% can be sold after 12 and 24 months
- These shares could be worth £24,000 or more per gold member branch, depending on the success of the float
- Loan notes are to be converted to shares
The free shares will go to any new agent who joins but the specific question that remains is how many of that 27% will go to the corporates? My guess is most of it. If I had to make a bet, I'd say 20%.
If I'm right, then when you take the shares reserved for management and the shares held by the investors, the new company would be controlled by a group whose interests look pretty well aligned.
The big corporates would have free or reduced price listings and they could support fee rises that would be imposed on their smaller competitors in order to drive up profits - that's a very virtuous circle for them.
The business proposition
In summary, the business proposition appears to be to copy Rightmove and in particular Zoopla by doing the following:
- Selling add-ons
- Widening the advertiser base
- Selling other services, particularly software for agents
- Adding functionality, an online hub and calendar
- Holding basic subscription fees initially before gently increasing them
- Controlling agents’ listings
- Dropping the One Other Portal Rule on the condition that a new five-year agreement is signed
- Applying a 10% discount for agents who voluntarily keep OOPR
- Holding agents who don't sign up to the One Other Portal Rule
- Spending £30 million on marketing in years one and two, reducing to £20 million thereafter
Based on this information, would you have signed up two years ago? I didn't think so.
However, if you did sign up, the big question is what to do now? Time is very, very short - amazingly so I'd say. There is an awful lot of information to take in and it will be tempting to abstain. If you do this, you will be helping the ‘yes’ cause and increasing the likelihood of the float going ahead.
It's my opinion that if you vote ‘yes’ or if you abstain you are helping big agents, investors and the board achieve their goals which are to make money by being just like Rightmove and Zoopla.
However, conversely, if you vote ‘no’ and you win, you will have used them to achieve your goals which were and still are to create an agent-owned portal with low costs to counterpoint the existing purely commercial players. If you lose the vote you still have the option to go along with the proposition if you want to.
We know roughly what to expect if the vote is ‘yes’, you get another version of what we already have - a mini Zoopla/Rightmove.
But what do you get if the vote is a ‘no’? That's where things start to get interesting.
My guess is that if the vote is ‘no’ the current board will resign, or at least there will be a big shake-up.
This will provide an opportunity to use the momentum created by this attempt to demutualise for the smaller mainstream agent members to seize control of their mutual and make it what it was always intended to be.
The great thing is that a new board would have a mandate for real change and some of the proposals on the table could be adopted, like dropping the OOPR, adding positive functionality and thinking of ways to lure in the fence-sitters.
The kernel of truth in all this is that it is the agents whose data is being used to make other people money. In order to get to first base, a true ‘Agents’ Mutual’ must attract agents like me and others, it can't work as a large minority, it has to represent and attract the majority.
So that's why I want to join a real Agents’ Mutual, not the outfit whose proposition has failed over the past two years and certainly not the Frankenstein’s monster that would be created if this float goes ahead.
And by the way, I think this analogy is especially apt. If the float goes ahead, I think the newly created company could suffer a similar fate to the mythical monster created by a man who would play God.