The online estate agency Purplebricks was touted as the ‘Uber of estate agents’, set to disrupt the dusty property world. It hasn’t exactly turned out like that.
Charles Dunstone, through his estate agency venture, Strike, has assumed control of Purplebricks. This move was precipitated by a staggering 91.2% of Purplebricks’ shareholders consenting to his £1 rescue takeover proposal.
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Freston Ventures, Dunstone’s firm, backed the takeover bid. Strike, for the token amount of £1, will acquire the majority of Purplebricks’ assets while also taking on all of its liabilities. Dunstone has acknowledged a potential penalty associated with Purplebricks’ past anti-money-laundering failings, but he expects any forthcoming settlement to be inconsequential. A bold attitude.
Purplebricks was saved, but only just
The future of Purplebricks was hanging in the balance before this takeover. It was haemorrhaging money to the tune of £850,000 weekly and had a cash reserve of £9.1 million by the end of April. It was staring down the barrel of administration.
Purplebricks was launched a decade ago by brothers Michael and Kenny Bruce and it gained rapid market share. Consumers loved it due to its competitive fixed-rate fees.
However, despite its initial success, Purplebricks was unable to maintain its momentum. Profit warnings, frequent changes in management, and strategic missteps became commonplace, and the company lost its footing. Even Helena Marston’s appointment as chief executive last spring couldn’t stem the tide. She resigned and with it, hope was dwindling.
Post-takeover, Purplebricks will exit Aim, London’s junior stock market, on June 16. The residual cash, estimated to be about £5.5 million after the company has been wound down, will be returned to the shareholders.
Purplebricks has had a huge fall from grace. It had a valuation of nearly £1.5 billion in 2017, but as it bows out of the stock market, it’s worth less than £2 million.
Spirits are high in Purplebrick’s new incarnation
Despite quite the checkered past, Dunstone, aged 58, is undeterred. He sees significant potential for disruption in the estate agency industry. His plans involve a merger of Strike with Purplebricks, to create a combined entity that hopefully achieves greater success.
Strike itself is an innovative twist on the conventional real estate model. Most significant of all, they charge no upfront listing fees. Instead, revenue is generated through optional services such as assistance with viewings, photography, conveyancing, and mortgage services. According to Dunstone, this provides a ‘value-oriented approach’ where customers pay only for the services they need.
Is the Purplebricks brand permanently damaged? Dunstone (unsurprisingly) doesn’t think so
Although Purplebricks’ reputation among the City’s investors has taken a serious hit, Dunstone is of the firm belief that the brand still holds considerable value among consumers. He remains hopeful and confident, pointing out that not all consumers delve into business pages. It does seem he underestimates the public’s ability to read a newspaper or the trending topics on Twitter.
Dunstone’s views on the no-commission model are pretty strong. He believes that asking for upfront fees discourages agents from pushing for sales post-listing. He commends Purplebricks for its disruptive beginnings but believes the company lost its way due to its high-cost structure and continually increasing prices. He believes this eventually shrunk the price gap between them and traditional agents, leading property buyers and sellers back to the same old brands they’d always known.