An activist investor, which yesterday increased its stake in Purplebricks to 4.2%, is calling on the chairman of the online estate agency to resign, citing a significant drop in the company’s share price and rapid level of cash burn.
Shares in Purplebricks have dropped sharply since it listed on Aim in 2015, after a series of profit warnings and operational blunders, causing market value to shrink to just over £45m, from £240m.
Shares in the AIM-listed firm currently stand at a near record-low of just 15.14p, which is down significantly from 103p at the start of last year.
Shares in the online estate agent have plummeted since its all-time high in 2017 of 525p, with recent regulatory failings, contributing to that decline. The significant fall in the firm’s share price has caused many investors to sell up, concerned that Purplebricks might be vulnerable to a takeover.
Purplebricks, who are currently facing a class action lawsuit from over 100 former agents who believe they were entitled to the benefits given to permanent employees, despite being classed as self-employed, has seen Lecram Holdings, the investment vehicle of Adam Smith, increase its stake in the company over the past month.
A letter to its chairman, Paul Pindar, on behalf of Lecram Holdings, the investment vehicle of Adam Smith, says that “urgent action is now essential” to restore the credibility of the company with investors”.
Pindar, a former chief executive of outsourcing giant Capita, has been non-executive chair since 2015. But Lecram argued that he should step down in favour of a someone with the “necessary experience and skills to address urgently the company’s continuing cash burn and operating performance within the residential estate agency sector”.
A Purplebricks spokesperson told EYE: “We sought to meet with Lecram Holdings to discuss their concerns. They declined. Its’ disappointing that they chose to go to the media instead, rather than engage with us.
“The board is well aware of the urgent need to turn around the performance of the business and become cash flow positive in the near term. We have already implemented a number of initiatives to achieve this under the new leadership of Helena Marston and look forward to setting out our plans in detail as part of our results announcement in early August.”
Purplebricks was due to announce full-year results today, but publication has been delayed until the first week of August after its auditor requested more time to assess the new processes and controls introduced since the last audit.