Purplebricks has struggled over the past 12 months, with shares in the online estate agency falling sharply, but are there tentative signs of recovery emerging?

Shares in the AIM-listed firm dropped to record-low of just 14p a fortnight ago, 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.

However, 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 its share price almost double in the past two weeks. The agency’s share price closed yesterday at 27.1p.

Furthermore, insiders at Purplebricks have been buying shares, suggesting that those working at the company are feeling optimistic about the company, and the direction it is heading in.

Insiders – the corporate officers, board members, and others ‘in the know’ – do not just manage the companies, they know the details. Their stock transactions can offer a strong indication of how the company is performing. Given that these people have the greatest  knowledge of what is happening at Purplebricks, it may be useful to take note when they buy or sell, especially in bulk, as has been the case in recent days.

Directors’ share dealings: 

Source: AJ Bell Management Limited 

But while the insider buying is a positive sign, investors are being warned to tread carefully, amid fears that the recent recovery could be short-lived, leaving them high and dry.

Stephen Wright, author at The Motley Fool, advised: “In the case of Purplebricks, I think that the insider buying is a positive sign, but I think there are limits to how much positivity the activity justifies.”

Looking at the transactions more closely, he points out that the recent insider buys were made at prices between 15.75p and 18.19p. The Purplebricks share price is currently 27.1p.

“So even if the insider buying indicates that the company’s shares were attractive before, it doesn’t necessarily indicate that they’re still attractive at current prices,” he added.

Wright explained that he has concerns about the underlying business.

He continued: “ gives people who want to sell their houses the opportunity to bypass estate agent commissions in exchange for a flat fee. Obviously, how much a vendor stands to save depends on how much the commission would have been. That, in turn depends on prices. Over the last few years, UK house prices have gone higher and higher, I would have anticipated this being good for Purplebricks, since it I would have expected it to make their prices look very attractive by comparison. But this hasn’t happened.

“Revenue at Purplebricks has come down consistently. Some of that can no doubt be attributed to the pandemic slowing the UK property market down. But Purplebricks hasn’t seen the kind of revenue recovery that other UK estate agents, such as Savills or Foxtons. This causes me to worry. The company appears to be struggling for reasons that I find difficult to see. And while I’ll be looking carefully at the insider activity if the share prices revisit their previous lows, I don’t think I’ll be trying to profit from the recent jump in Purplebricks shares.”