Purplebricks, the online estate agency that was supposed to disrupt the UK real estate market with its disruptive technology, has now reached an agreement to sell the business for £1.
Purplebricks would transfer its assets, business and liabilities to Strike, but retain cash of up to £5.5mn to be returned to shareholders, including German media company Axel Springer.
Purplebricks was founded in 2014 by Michael Bruce and Kenny Bruce to compete with traditional estate agents by offering a cheaper model online. However, the company struggled to gain any traction. In February, the company announced that it was searching for buyers after its turnaround plan failed.
Paul Pindar, the chair, said: “I’m disappointed with the financial outcome, as both a 5% shareholder and on behalf of [other] investors.” “However there was no alternative proposal or offer that provided a greater return to shareholders with the same level of certainty in funding and speedy delivery required.”
David Reynolds, an analyst at Davy said that the deal “feels a deeply distressed sale.” The consideration for £1 clearly reflects this.
He added, “I believe they just struggled to deliver the promise of the model. That was a disruptor to UK estate agencies.”
The purchaser, Strike is backed by Sir Charles Dunstone (co-founder of Carphone Warehouse), who has said that he remains determined to shake the estate agency industry.
Dunstone stated, “We are committed to the online business model which provides customers with a better experience for a lower price.” Purplebricks has changed the industry dramatically by driving down the costs of estate agencies. We aim to combine Purplebricks’ significant brand recognition with a more disruptive business model.
Purplebricks’ well-known name was its greatest asset, despite the criticism that the company had spent too much money on marketing and failed to translate this into profits or sales.
Since its launch on London’s Aim junior market in 2015 with the backing from then-star fund manager Neil Woodford, Purplebricks share price has fallen by 99 per cent. Bruces left their business in 2019, after recognizing that it had grown too quickly.
Purplebricks reported that Axel Springer had agreed to support the transaction, which is subject to shareholder approval. Axel Springer owns a quarter of Purplebricks, after initially investing £125mn at £3.60 per share in 2018.
Purplebricks intends to delist itself from the London stock exchange after the completion. The company warned its shareholders in early April that they were likely to get less money than their share value from any sales.
The board of directors concluded that only Strike’s proposal would be implemented in time to solve “short-term funding issues”.
Reynolds said that the device is “a bit of a symbol of UK digital innovations”. . . “This has ended in an ignominious manner.”