Purplebricks shares crumbled to a record low yesterday as it warned of a cash crunch amid a race to find a buyer – sparking fury from a top investor.
The online estate agent’s woes have deepened after the payments company it uses to process customer fees decided to withhold some of the cash.
Purplebricks also revealed that the number of instructions from homeowners using the platform to sell their properties has nearly halved in recent months.
Shares hit: Purplebricks’ woes have deepened after the payments company it uses to process customer fees decided to withhold some of the cash
And the company – which put itself up for sale earlier this year – said takeover offers on the table would leave investors with a return ‘materially below’ its market value. Shares crashed 65.7 per cent, or 3.6p, to 1.88p.
The latest slump sparked fresh criticism from activist investor Lecram Holdings, which is the sixth biggest shareholder with a 5.2 per cent stake and has been calling for chairman Paul Pindar to be replaced by industry veteran Harry Hill.
Lecram chief Adam Smith said: ‘This is exactly what we feared would happen without a change in leadership.’
Founded in 2012, Purplebricks rose to prominence as a disruptor of the traditional high street based estate agent business model and its share price topped £5 in 2017.
But after problems including an ill-fated international expansion its value has since tumbled – and it last year saw a series of changes at the top of the company as well as suffering vocal criticism from a major shareholder.
The company’s latest trading update showed instructions levels had not increased in the fourth quarter to the end of April as had been anticipated, and instead fell to 5,672 compared with 10,964 a year earlier.
Purplebricks differs from traditional estate agents by charging a flat fee for selling properties rather than a percentage of the selling price.
The fee can be paid up-front or after completion of a sale.
But the company revealed that in the light of its current financial position, the firm that processes its ‘pay now’ option has ‘exercised its right to withhold a portion of remittances to the group’, damaging its cash position.
With £9.1million in the bank, Purplebricks believes a hoped-for return to cash generation over the coming months is ‘unlikely’ given current trading and uncertainty over its future.