REVIEW: Is the Purplebricks wall collapsing?
With the departure of Purplebricks CEO Vic Darvey citing ‘personal reasons’, how long will it be before the board is forced to resign over the company’s catastrophic failure?
Certainly the writing is on the Purplebricks’ wall given their disastrous fall in share price in recent weeks to 14.7p at the time of writing – and 12.25p to an all-time low.
How much more will it take German shareholder Axel Springer before ending this doomed venture? I have always said that real estate agencies should be run by real estate agents.
Less than five years ago, shares were at an all-time high of 514.5p. The company is worth a tenth of what it was worth then. Just £45.1million. It’s a sobering thought. Will there soon be a for sale on this business? I’m pretty sure there will be plenty of organizations that want the brand name, but with a better model, one that brings in a nice profit.
Investors were left spooked after its dramatic collapse in market share from 5.1% to 4.6% in the year to April 2021 – and now at 3.9%, as the revealed their semi-annual update in January.
How Purplebricks thought they could achieve a 10% market share, as they have consistently stated, is beyond me, especially with so many online agents clicking on their heels. Although I can see people like Strike and Yopa heading in the exact same direction.
I must admit I also raised my eyebrows when I read Vic Darvey’s comments that they had received “4,500 applications from the High Street” since September. Given that there doesn’t seem to have been a mass exodus of staff from the High Street (and I don’t know anyone in the industry who talks about such an exodus) the high number of applications doesn’t seem to have resulted in a significant number of experienced staff joining Purplebricks.
Those kinds of comments sound like the ones that came out of Camp Countrywide with Alison Platt at the helm – and look what happened there.
Decreasing liquidity levels in a market with diminishing instructions and sales is not a recipe for success, especially in a time of rising inflation and international uncertainty. So I can’t imagine why existing agents would rush to jump on the Purplebricks bandwagon. I also can’t see them becoming a true national brand as there are many areas that just won’t be profitable at the fees they charge.
With so much uncertainty, surely clients too must be wondering if they should put their property on the market now with Purplebricks?
When launched ten years ago, Purplebricks was a real challenger to the old estate agency model and broke new ground by becoming the largest stock-based estate agency. So to see what has happened to him, with his rental problems and the way he is burning through investors’ money, is a tragedy for his workforce under his new full-employment model.
The company has potentially exposed itself and landlords to claims related to recording rental deposits, which could see Purplebricks pay nearly £4million. It also reported a loss of £20m for the first six months of the year, and faces a class action lawsuit from former local estate agents.
Even his latest ad campaign is being criticized amid fears it is misleading. He threw millions at his branding and marketing – £18.9million in the year to April 2021 – a fifth of his earnings, although down 8% from 20, £6m the previous year, and down from the £26.7m reported in 2019.
If he can’t make any money with all the exposure and recognition of his brand, he has only one choice: raise his fees by at least £1,000 and act like a real estate agent.” normal” or give up!
The City simply does not believe that its business model is a model for the future.
Paul Smith is Managing Director of Spicerhaart.