As noted in Estate Agent Today’s news pages, OnTheMarket’s (OTM) recent dire share performance (at time of writing the price is about 116p) may be indicative of nothing.
There are many examples of shares fluctuating wildly for no apparent reason other than the greed of speculators. However, even if the fall in the OTM share price has nothing to do with its performance or prospects, it’s still disappointing for investors.
Especially the ones who were persuaded to back the float on the basis of a projected market capitalisation several times higher than the present one, which is currently just under £71 million. I seem to remember a figure of £250 million being mentioned somewhere…
Of course, there is another way of looking at it, a view I have advanced many times, a view which asserts that OTM is a company which started with a bad business model, now has a history of broken promises and is a company resented by many of its shareholders and members, some of whom are just waiting to escape.
I know of at least one company in this position, a company wise enough not to have signed up for a new five-year agreement at the time of the float, but it still has over 18 months to go before its current agreement ends and is still locked into the One Other Portal rule.
However, it hasn’t sold its shares yet, even though it is free to do so and the reason has nothing to do with the shares prospects or performance.
It actually wanted to sell on the first day of trading but couldn’t because it was not sent its shares and is still waiting for them.
From what I gather, along with other agents in a similar situation, it won’t get its shares until on or before April 10. This was apparently all spelt out in the pre-float documentation as was the obligation on OTM to pay interest on its loan note up to the day of the conversion. This will be cold comfort unless the shares recover as the fall in share price is to date several times the interest earned.
As I say, disappointing but then again disappointment has been a theme that has accompanied the whole OTM saga. Disappointment by the founders that more agents didn’t join them, disappointment with the failure to unseat Zoopla as the number two portal and of course disappointment that Rightmove has continued to go from strength to strength - helped, some would say, by OTM’s attempt to disrupt the market and create more competition.
The whole saga is also full of irony as well, at least that’s how I see it. Ironic that the way to create more competition is to restrict choice, a view thus far supported by the courts.
Ironic that the main outcome of its efforts has been to slow down but not stop Zoopla and recreate Rightmove’s monopolistic position.
Ironic that all the fine words about defending the high street against the march of the virtual agents have been forgotten in the rush to float and ironic that the agents left paying the most and with the least to show for it, are the ones who have shown OTM the most support.
So, returning to the question of the share price, is it really indicative of nothing that it has fallen so low post-float, or is it a judgement of what the market is coming to see as a failed proposition, a busted flush?
Well, based on my judgement, I’d say the latter but markets are fickle and you never know. Well, actually that’s not entirely true. Sometimes, you do know because the information is right there hiding in plain sight.
In this case we know a virtual lock-in ends on April 10, will it result in a bloodbath as these agents scrabble to sell their shares and recoup at least some of their losses? We don’t know, but we won’t have to wait long to find out.