…By Henry George for TDPel Media.
UK-based online estate agent PurpleBricks has reported that the number of properties it was instructed to sell in the last quarter did not grow as expected, leading to its payment provider withholding funds.
As a result, the company now has only £9.1m in cash left and no longer sees a path to profitability at the start of the next financial year.
In response, PurpleBricks has decided to speed up its sale process.
While the company has engaged with several potential buyers, so far, all existing offers have fallen short of the company’s current share price.
Lower-than-expected sales growth leads to loss of revenue
PurpleBricks had put itself up for sale after issuing a profit warning in February 2023.
The company announced that during the last quarter, it had received 5,672 instructions to sell, which was only slightly over half the number it had received in the same period of the previous year.
The lack of growth in the number of properties for sale led to the company’s payment provider withholding funds, resulting in the loss of revenue.
The company is now left with only £9.1m in cash and has no clear path to profitability.
Short-term extension granted for agreement with ‘pay later’ provider
PurpleBricks’ agreement with its ‘pay later’ provider expired at the end of April, but the company agreed to a short-term extension of the partnership.
However, it warned that its cash position would be in even more danger if it could not work out a long-term deal.
Given the challenges of finding a buyer at the hoped-for price, the company’s board is also considering a potential equity raise again.
However, the company failed to generate much support for this earlier in the year and believes that it is unlikely to receive any interest this time around.
Potential offers fall short of company’s share price
PurpleBricks has engaged with several potential buyers, but so far, all existing offers have fallen materially below the company’s current share price.
When it announced its intention to sell, the company’s board had stated that the main value of the business lay in its brand recognition following several strong marketing campaigns in previous years.
Shares plummet by 54% to 2.5p
The news has had a significant impact on the company’s share price, which plummeted by 54% to 2.5p today, resulting in a market capitalisation of £6.7m.
The share price is down 99.5% since its peak in 2017 when the business was valued at £1.35bn, or 498.5p per share.