Troubled online estate agent Purplebricks has agreed to a deal to sell its company and assets to a rival financed by Sir Charles Dunstone, the founder of Carphone Warehouse and TalkTalk, for a meager £1.
Purplebricks' stockholders will virtually be eliminated by the agreement with online rival Strike, which drove stock down another 40% on Wednesday (17 May) morning. Strike will also take on Purplebricks' liabilities in accordance with the terms of the agreement, but it has warned of job losses among the company's more than 750 employees.
Although employees will migrate to Strike, the company plans to start a redundancy program that is expected to affect Purplebricks' field agents and central support teams, though it did not specify how many positions would be eliminated. Following the closing of the sale, Purplebricks CEO Helena Marston intends to stand down, along with the rest of the board.
Purplebricks said the proposed sale is anticipated to preserve the company and its reputation while providing a modest return to owners.
Why is Purplebricks in trouble?
Purplebricks is an online estate agency founded in 2012 that initially gained attention for its innovative approach to the traditional real estate industry, which allows homeowners to sell or let their properties without using a traditional high-street estate agent.
The company's business model revolves around providing a platform for homeowners to list their properties, connect with potential buyers or tenants, and manage the sales or rental process.
Purplebricks utilises digital technologies to streamline the selling and letting process., and provides tools for property listings, scheduling viewings and communicating with potential buyers or tenants.
The company revealed last week that it was in exclusive talks with Strike about a deal for the business and assets, but that Strike had withdrawn from a proposal for the entire share capital of the company. It forewarned at the time that any such deal would provide stockholders with a meager return.
News of the talks broke just one day after Purplebricks warned that its cash reserves were in danger. The company has had a challenging 18 months, marked by changes to its operating model, multiple management shakeups and shareholder demands for the resignation of Paul Pindar, the company's chairman.
On the new agreement, Pindar said he was "disappointed" with the financial value outcome, but said there was "no other proposal or offer which provided a better return for shareholders, with the same certainty of funding and speed of delivery necessary to provide the stability the company needs.”
The company announced in February that it was putting itself up for sale because its turnaround plans had been more expensive than anticipated and it was going to continue to lose money.
What does it mean for housebuyers?
The impact of the sale and potential changes on Purplebricks' customers and users will depend on the specific plans and strategies implemented by Strike. Known as HouseSimple until 2020, the company is an online estate agency which, like Purplebricks, aims to offer a more cost-effective and streamlined alternative to traditional high-street estate agents.
Both companies operate in the online estate agency space and offer similar services aiming to disrupt the traditional high-street estate agency model, and both provide digital platforms for homeowners to sell their properties with fixed-fee pricing structures.
Notable investors include Sir Charles Dunstone, a partner at Strike’s joint major shareholder Freston Ventures and the founder of The Carphone Warehouse, who expressed his support for the company and its online estate agency model, acknowledging the potential of disruptive technologies in the real estate industry.
Sir Charles described the new Purplebricks deal as a “positive outcome for anyone looking to sell their home and save money doing so," and said “Purplebricks has dramatically changed the industry by driving down the cost of estate agency and we aim to combine its significant brand recognition with an even more disruptive business model.
“In bringing together the two brands, we will supercharge Strike’s mission to democratise house selling by empowering customers to have more control over a process that has barely changed for 200 years.”