Purplebricks shares yesterday rocketed to an amazing new high – and this morning, continued their meteoric ascent.
Yesterday’s rise took place mainly in the space of the last half an hour of trading on the stock exchange, finishing the day at just over 300p, and at one stage hitting 310p. Altogether, by the end of the day, the share price had gone up some 24p, or around 10% in that barn-storming finish. This morning, in early trading, the shares shot up to over 340p.
Yesterday’s finishing share price – now over three times what they were at launch in December 2015 – gives Purplebricks a valuation of £641m. The firm has so far posted only one profit of £300,000 based on ‘adjusted’ EBITDA, although the Telegraph said that this was in fact a pre-tax loss of £2.8m.
By comparison to yesterday’s valuation of Purplebricks at £641m, Countrywide has a market value of £412m, Foxtons £270m and LSL £208m. It means that Purplebricks is worth more than Countrywide and LSL combined.
Meanwhile, investment website the Naked Fund Manager has drawn attention to “the size of the task” facing Purplebricks’ online competitors.
The blog includes a chart showing website visits per month running at around 750,000 for Purplebricks.
By comparison, housesimple receives 208,000 visits, emoov 104,000, YOPA 88,000 and hatched 21,000. (All the figures are from similarweb.)
The Naked Fund Manager says that Purplebricks’ marketing spend last year was £13m, and that for any of its competitors to “make any inroads into market share they will need to spend at least this much”.
The Naked Fund Manager does speculate that one source of competition to Purplebricks that could arise is from Rightmove and Zoopla – but points out that were they to move into competition with established estate agents, they would risk their market share, with agents deserting their respective portals.
The blog goes on: “The counter to this is that the balance of power has shifted and is in the hands of the online platforms. It is now critical for an estate agent to be present on Rightmove if they are to be effective for their customers.”
Of Purplebricks’ expansion into the US market, the Naked Fund Manager expresses significant doubts.
It describes the market as highly fragmented. Furthermore the commission is split between the listing brokerage and the brokerage that represents the buyer: each typically takes 50%, but then the brokerage has to split further with their agents, and so the commission is often split four ways. A senior agent could get 90% of that 50% split commission.
The blog believes that Purplebricks will not be competing on price when it moves into the States, and says the reason is that “it will struggle to attract talent if it reduces the commission attainable by good agents”.
There is also an interesting observation about local knowledge, both in the UK and the States.
“The argument that the local knowledge held by the local realtor leads to an optimised sale price, justifying higher commission rates, appears to hold sway at the moment.
“This argument has been steadily eroded in the UK over the years as platforms like Rightmove, and now Purplebricks, have, in my view, started to commoditise estate agents and challenge the status quo.
“While the preponderance of individual realtors represents an opportunity, it also implies a cultural preference for the personal touch. As detailed in the stats, there is a high number of buyers and sellers that rely primarily on word of mouth. This preference may lead to a slower take-up in the US compared to the UK.”
Rightmove watch out! There is no doubt the real goal of PB is to get to a point where they can stand on their own website traffic and they don’t need you anymore. And you are not only allowing this to happen, but actively courting it!!
What will they be worth when they have achieved their goal and what will you?
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“…the real goal of PB is to get to a point where they can stand on their own website traffic and they don’t need you anymore.”
Taking aside the whole argument that RM have lived and thrived on since the early noughties that it’s var-nigh the one-stop shop for whole-of-market information and listings, AgentV, surely the public would rather visit a site where constant #relistings, bumpings and other shenanigans are filtered out and reshuffled back into the middle of the pack and they can see a more realistic guide as to length of time on market (and Agent ‘success’)?
Well… when such shenanigans are filtered out some of the time, at least…
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No question, but if you have a seemingly continuously rising share price and keep taking bites and chunks out of other’s share prices, how long is it before you can raise another huge wad of money to go on the acquisition trail…..purchasing large amounts of property listings….countrywide for instance?
I am sure there are many more knowledgeable people than me, but is this scenario a possibility beyond just a paranoid fear?
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AgentV
“…how long is it before you can raise another huge wad of money to go on the acquisition trail…..purchasing large amounts of property listings….countrywide for instance?”
WHY would PB possibly want that? Those properties will all be on NSNF Agreements – worth zero percent of chuff-all to a company that owes its existence partly to charging for the privilege of NOT selling clients’ homes.
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But what happens when you have more property listings on your website than rightmove have on theirs (after you have removed yours from them)? What are you then worth as a company. I know it’s totally hypothetical, but supposing the PB model is only a stage one.
If I was in their shoes with the share price going the way it is I would be looking at all options, including dual offerings. Just thinking totally hypothetically of course.
I never understand why RM let them use the site in the first place knowing that it would infuriate many of its other existing customers.
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Anyone know what it was in the last 30 mins that sparked the rally?
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Probably a self fulfilling prophecy of people talking and buying.
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Spike in February instructions put them on course for meeting this FY ‘s. targets The monthly total even allowing for any shenanigans reaching the average monthly total required to meet next years targets too.In addition a good piece on Research Tree analysing their potential in the US market Today the market valuation has shot past £900m !!! CWD eat your heart out
Surprised Platt hadnt applied for the job of US CEO!
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I qualify that even though February is a short month they havent reached next year’s aveage monthly target this month (57,000 for FY18 ) and still likely ey to miss the original target of 41,000 instructions for this FY Momentum has increased throughout the month and no doubt theTV advertiisng has hit home
What I find amazing is that Bricks are winning instructions for £50k proeprties when they are no cheaper
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Hillofwad71
“What I find amazing is that Bricks are winning instructions for £50k proeprties when they are no cheaper”
Are you saying that you will sell £50k properties for under £850 on a NSNF basis?
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They have a number of properties already listed in UK for under £75k wheretheri fixed fee doesnt look so attractive
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I agree, but will the time come when PB make a play for Rightmove? Matriphagy – when the baby eats it’s mother, there is only one way Rightmove can prevent this, kill it off before it becomes too strong. What would happen to PB share price if they lost thier advertisng platforms, come on Rightmove & ZPG get that pillow out and shove down hard. Alternatively all the agents could jump ship to OTM and leave the parent to fend for itself.
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Some excellent points…..does anyone feel like me, that we constitute the largest part of our industry, but we are starting to have the least control? I genuinely fear for the future of my small independent business!
With this morning, yet another software provider (and all the data) being gobbled up by Zoopla, the time has finally come to put aside our differences and rally together under one united ‘Independent’ banner.
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‘If you see a bandwagon, it’s too late’ James Goldsmith.
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PB have everything going for them except their product – however, we all know that they don’t need a good product to start steamrollering the industry. Every £ that goes into PB isn’t going to another agent, and the idea that we all need to market for £13m p.a is obscene. As much as most of us detest the idea of PB, we must admit that they are clearly doing a lot of things right to get attention. And today, in the age of very short attention spans and even quicker decision-making, attention is god.
My underlying fear is that they will reach critical mass (as we all expect them to) at which point they will have no choice but to significantly improve their product – right now they can get away with it because they don’t have enough customers or sales to get noticed. However, when the day comes that PB is a household name in estate agency (heaven forbid and I hope not) too many people will know about them. They won’t get away with funny TV ads when everyone knows someone who got screwed by PB. I think the secret will come out that this is isn’t an estate agency, it’s a listing business.
At that point, crunch time will arrive. Will PB have enough money to A) improve their service, B) spend so much on advertising and PR that people forget they’re no good or C) something I haven’t even had time to think of yet.
In short – PB are doing a lot of stuff to grow, to set themselves up for a successful future, but they will forever be held back by their product unless they have something big in the pipeline to win customer hearts and minds.
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As independents we have ‘the product’ and the local knowledge and contact. At the moment we still have the local power…at the moment. What we don’t have is the marketing power. That is the difference. There is no reason that we can’t achieve that, especially with the expertise we have ….and the ideas from such people as Robert. We just need to put our individual differences aside and unite as individual businesses within a collective marketing idea. Lets get the general public to think INDEPENDENT above all else in five years time when it comes to selling their property!!!
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Agent V if you spent less time devoted for the next article about PB and then individually commenting back to anyone who has a difference of opinion you might actually convince me you have a product worth while. I would be so annoyed if i was one of your customers because you sit on here all day talking about PB. while they are building a fantastic British export your obviously sat there stale hoping a customer walks into your branch that might be annoyed as much as you are at PB.
can I ask did they steal a regular customer from you? I’ve never seen such a display of bad business
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Trem9295
Thank you for your criticism. We are disappointed you have experienced a bad service as it is always our aim to entertain and promote debate. If you notice we never criticise other people’s opinions only voice our own.
FYI I have personally answered in the region of 150 telephone calls, carried out two valuations, one take on, 35 viewings and dealt with eight offers so far this week. I usually post in the breaks between viewings on a mobile device, which is why it has taken me so long to reply to you.
If you knew me you would see that no one works harder on behalf of their vendors and potential buyers alike. Would you like me to prove it by selling your property for the best price possible?
I have nothing against PB directly, only against the propaganda that is directed towards slating what I and my fellow independent agents do ….when we spend a great deal of time and trouble to achieve the best possible sale result for our vendors, and all typically for an average no sale no fee of less than £2,000. When you take into account the spend by PB per property sale of investors money plus their fee, even if the property is not sold, I think we represent remarkable value for money in comparison….as well as giving a better service.
If PB did not criticise what I ,and my fellow independents, do in their marketing and advertising then I think I would have very little to say about them.
Your turn to debate sir!
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Just taken a phone call from one of our vendors. They are worried that since launching their property last week we have carried out over thirty viewings, with four or five offers, and that we may sell their property way quicker than they expected, not giving them enough time to find somewhere to move to.
I have assured them that every potential buyer will be made aware of their timescale for only completing in five months time, and that we won’t be pushing them out of their home before they are ready.
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£3.32 ta
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I work in a busy Sussex town with a population of 35,000.- 40,000. In February Purplebricks were instructed on one property. This is similar to each month of last year. One to three properties a month. In other words despite everything there has been no real impact on the local agents in my town and towns around us. How about your town/patch?
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unfortunately PB aren’t running their business like that at the moment. They’re focused on stock price and valuation – they really don’t care about turning a profit or gaining customer affection yet.
Better to not judge them on something they’re not deeming a priority. Meetings with investors are 100% not going to focus on number of sales. They’re focusing on plans and how to dominate the market in the next 10 years etc.
BTW – this stinks. If they’re gonna con the punters on TV at least put some effort into gaining local market share. But PB is treating their “on the ground” business as a trial period or pilot at the moment.
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PurpleBricks are flying under the radar. Nationwide they have fewer than 400 Local Property Experts so will be concentrating on the higher density areas first. In February they achieved over 4000 instructions and it’s growing all the time.
LPE’s are given shares so the booming share price is a huge incentive to get on board for new LPE’s
There’s an awful lot of complacency among traditional Estate Agents from what I can see and they are always very keen to allege a poor standard of service from PB. However I’m not sure this is the right approach. The public think High Street Estate Agents charge too much and don’t exactly think they get a high standard of service either. So perhaps the better approach would be to improve the standard of service.
Or perhaps it’s already too late.
Also, soon there will be others copying PurpleBricks. £14M a year advertising is peanuts to a company like Virgin.
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Cyber
PB have also exploited the lack of unity amongst agents The RICS being a country club with more interest in the educational l side than the practice The NAEA confining their attetion to some badgeses in esate agents windows .Took on board how RM and Zoopla walked through an open door and must be chuckling at the current spat with OTM
Lets not get too carried away with The Purple Tulip Feb has been a very good month about 3,500 and picked up from a very poor late November and December Still going to be slightly adrift of the 41k target for the FT 17 so March needs to be a record month
Apart from the fundamentally flawed Trustpilot there has been no independent research which indicates that Purpelbricks of a better service In fact a lot of crticism as you are aware they took down the Facebook site because of it. The fact that the LPE,s are now subletting their empires I’m worried about the quality of the bottom feeders who will be desperate to gain an instruction at any cost to make a living
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>Apart from the fundamentally flawed Trustpilot there has been no independent research which indicates that Purpelbricks of a better service
Hillofwad71, I’m not saying that PB offer a better service. What I’m saying is that I don’t think the public are happy with Traditional Estate Agents in general and are more likely to think that PB’s service can’t be much worse and they would rather pay £1000 than £4000 for that service.
I’m not even sure the recent allegations by CIELA will have the desired effect. You know what they say. There’s no such thing as bad publicity. Well there’s a degree of truth in that. Any publicity derived will be accompanied by a response from PurpleBricks and the name will stick in the minds of homeowners.
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The problem is that the public think estate agents make huge profits. The rank and file of estate agents will know this is not the case – read the chapter “Online v High Street” in The Real Estate Agent and the Great Conspiracy Theory to see the simple economic argument why Purple Bricks cannot make profit and provide the same service. Who knows, it might even be of interest to Purple Bricks investors!
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Where’s our recent newby poster ‘Manganese06’ in all this online/traditional debating?
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shrewdagent170 Re: “The problem is that the public think estate agents make huge profits”
I debate this because I worked in recruitment for a while and almost no one working in sales wanted estate agency because basic was too low and OTE wasn’t as unlimited as other industries.
In the ’80’s we had lots of candidates because the OTE was achievable and pretty good even though I wasn’t in recruitment then but as a manager of a few estate agencies in London I never struggled to find talent.
I think PB share price is utterly ridiculous what’s more they haven’t really established their longevity as a real concern because as any estate agent will tell you they survive and thrive on recommendations.
Now it occurs to me anyone who has actually been through this with PB are not as likely to go through them a second time because all the feedback I get from people who tried to sell or did actually sell with PB didn’t enjoy the experience at all. Therefore based on my very limited (but so far, 100%) feedback! I cant see PB making second time around house sellers sign with them again.
Which just leaves the huge gap between what people tell me and what people say about them on review sites. Something is rotten at the core !
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