Purplebricks - property’s worst-ever stock market investment?

Purplebricks de-lists from the London Stock Exchange’s Alternative Investment Market on June 16 - the end of what many regard as an unparalleled collapse in value for a listed property firm.

On December 17 2015 it floated at 100p per share and was valued from day one at some £240m which raised eyebrows at the time, especially amongst the mainstream estate agency industry which felt threatened by the language and techniques used by the Bruce brothers who founded the company.

Its first month of trading gave no indication of the highs and lows it would go on to create in terms of share price, but it certainly did give an indication of the volatility that shareholders would come to expect.

Almost as soon as it started trading on the AIM its price appeared to lack the confidence of many investors and it closed that first day down seven per cent at 93.0p. It rallied early in the New Year, ending January 5 at 99p, it’ was downhill to 75p by mid-January.

In January 2016 the so-called ‘star’ fund manager Neil Woodford - now best known as founder of the controversial and defunct Woodford Investment Management fund - increased his stake in Purplebricks to over 25 per cent.  

But soon there began what looked like a love affair between investors and Purplebricks’ share offer. Fast forward a year and by early 2017 its share price hit 193p following a tweet from the company saying: "January has been a record breaking month for valuations and instructions, so if there's a right time to start your property search it's now."

Mainstream agents appeared on the back foot - they, like the economy, were reeling from the Brexit referendum result, the introduction of a stamp duty surcharge for additional homes, and the prospect of a lettings agency fees ban. Online and hybrid agents really did look - perhaps - that they were going to disrupt.

But then in the summer of 2017 perhaps the company’s first serious mis-step (to put it generously) was discovered by undercover reporting from a BBC show.

The company received a slating on BBC Radio 4’s You and Yours which said in its introduction: “The online estate agent Purplebricks is making exaggerated claims that it has already been banned from making by the advertising regulator.” 

A parallel BBC One TV Watchdog programme the same day said: “We have seen emails that Purplebricks has sent to existing and prospective customers repeating those claims.”

The You and Yours programme played an audio recording - repeated with video in this evening’s Watchdog - from a customer, John Bristow, who instructed Purplebricks and chose to defer his £1,199 fee. “I received an email after I deferred it to say I’d entered into a credit agreement” says Bristow, who suggests he had not been informed of having entered into such a deal, which was with a separate firm called Close Brothers.

In response to that controversy, and the live TV interview given by Purplebricks founder Michael Bruce, the booming share price began what was to become a frequent rollercoaster ride.

Over the summer of 2017 it had single days where it lost as much as seven per cent of its share value and others when it closed at record highs - the highest of all being 514.99. 

Then the rot set in. 

More mis-steps followed with international expansions which did not go according to plan, producing frequent ‘re-shaping’ of price and sales offers in Canada, the US and Australia. In 2018 it acquired a Canadian fixed-fee agency for £29.3m and at much the same time it announced a new joint partnership with Axel Springer called NewCo in order to take a 26 per cent stake in German online agency Homeday, with a possibility it could raise its involvement to 50 per cent in 2019.

In 2019 Michael Bruce left the company unexpectedly, prompting a 12 per cent slide in the company’s London share price. Estate Agent Today recorded at the time: “The agency's share price closed at 119p yesterday, down almost 12 per centfor the day. It still remains above its December 2015 launch price of 100p, but is a shadow of the high recorded in July 2017.”

Ongoing post-Brexit uncertainty in the UK economy and high profile criticism of Purplebricks’ sales record by some industry figures led to a long-term slide in share price, with some spectacular single-day falls. 

In the autumn of 2021 it was trading at between 30 and 40p a share, roughly seven per cent of its all time high. In November 2021 Purplebricks’ share price dropped 37 per cent in just one day following a profits warning over its “challenging” past six months - even though five of those months were during a stamp duty holiday, when most agencies enjoyed bumper business.

The more recent history is a tale of continued decline and, in some cases, denial. 

Just last month Lecram Holdings, an investment group which held about five per cent of Purplebricks’ shares, withdrew an offer to buy the agency saying "the financial condition of Purplebricks was found to be significantly worse than expected."

Now owned by Strike - bought for £1, the price of the an original single share when Purplebricks floated - more familiar refrains are being heard. 

New chief executive Sam Mitchell claims the company is returning to its “disruptive roots” by cutting prices to customers while 

Dominique Highfield - Purplebricks’ former chief financial officer, and in the new Strike-owned management structure - has taken to LinkedIn to say: “The power of two online estate agents combined is set to truly disrupt the market.”

At the same time the Stock Market ticker indicates that Purplebricks’ share price in its final days - around a third of a penny - is down 99.6 per cent on its launch price.

At least now that Purplebricks is de-listing, those appalling losses by shareholders will be a little less public.