The share price of online estate agency Purplebricks reached a dizzying all-time high this week after it broke the £2 per share barrier, more than double their original launch price.
At the time of writing present market capitalization of the firm is just under £500 million, dwarfing the UK’s largest estate agency, Countrywide, who’s market cap is sitting around the £375 million mark.
It was confirmed that the firm’s Chief Technology Officer, David Kavanagh, sold just over 100,000 shares just before Christmas which netted him a healthy £150,000.
However, by selling his stock before this recent price spike the tech exec missed out on an extra £50,000!
CEO and co-founder Michael Bruce holds 40 million shares and his brother Kenny holds a healthy 12 million, giving the Bruce brothers total holdings value in the company of over £100 million. Not bad for a firm that’s barely 3 years old.
The company appears to have made TV advertising a priority, strategically selecting Boxing Day to launch a new campaign challenging why people pay billions of pounds in commission. Aware that January is a key month for home selling, the ad promotes the ‘commisery’ of sellers, “the service they receive is the same whether the house is valued at £100,000 or £1m, therefore the fee paid for securing the sale should be the same” said Bruce.
Celebrity TV presenter Amanda Lamb has been recruited to front the campaign, “this campaign will open people’s eyes to commisery – the misery you feel when you’ve forked out thousands on commission and haven’t got anything more for your money” says Lamb.
Purplebricks continued its global expansion by moving further into the lucrative Australian market last week, launching in Sydney after finding success in the Brisbane, Melbourne, and Gold Coast markets last year.
“We are confident that our demonstrated success in auction and private treaty sales across the country is setting us apart from traditional real estate offerings and will make a substantial and positive difference for homeowners in Sydney” said Bruce.
DMZ continue to be impressed with Purplebricks, but we think traditional agents share prices are being disproportionately hit by the hype of their online and hybrids counterparts.
Stalwarts like Countrywide and Foxtons are priced at all-time lows on city brokers Bloomberg’s, which we think is as much down to perception and psychology as it is business fundamentals.
The growth trajectory of online agents is (and will continue to be) remarkable, but the fact remains that online and hybrid agents still take less than 10% of total market share between them and as impressive as their growth has been, over 90% of all estate agents fees currently abide by the traditional commission structure.
At 93p per share, even taking into account post-Brexit headwinds, Foxtons share price is woefully undervalued. Although they may need re-structuring in the long-term, DealMakerz think there’s life in these old dogs yet.