Purplebricks, the troubled online estate agent, has reached an agreement to sell its business and assets to rival company Strike for a nominal amount of £1.
Purplebricks aimed to establish a cost-effective and adaptable estate agent model by implementing a fixed-rate fee for house sellers.
Despite once being valued at over $1 billion (£800 million), Purplebricks, the UK firm, initiated its sale process in February. The company stated that the deal would result in job cuts and the departure of its CEO following the completion of the sale.
Following the announcement, the shares of Purplebricks plummeted by approximately 40%. Over the past 18 months, the company has undergone multiple management changes, a restructuring process, and a major shareholder called for the removal of its chairman, Paul Pindar.
In February, the company disclosed that it anticipated a loss ranging from £15 million to £20 million for the year. Last week, Purplebricks announced its exclusive negotiations with Strike.
The sale price of £1 is reportedly attributed to the company’s significant cash burn, as per information obtained by the BBC. Purplebricks is currently incurring monthly expenses of £3 million, covering various costs such as staff, hosting, and marketing.
Over the past year, Purplebricks has been carrying out staff layoffs, while its sales have suffered. However, it is believed that out of the company’s workforce of over 750 employees, efforts will be made to retain a significant number of them, as per the information received by the BBC.
Following the completion of the sale, Purplebricks’ Chief Executive, Helena Marston, is expected to resign, and several directors will also step down from their positions.
Expressing his disappointment, Mr. Pindar stated, “I am disheartened by the financial value outcome, both as a 5% shareholder personally and on behalf of the shareholders who have backed the company during my tenure and that of the board.”
Mr. Pindar clarified that despite the circumstances, no other proposals or offers were presented that could deliver better returns for shareholders while guaranteeing the required stability, funding certainty, and swift execution.
As part of the deal, Purplebricks announced that its £33 million liabilities would be transferred to the new owner. The company, established in 2012 by brothers Michael and Kenny Bruce, who hail from a council estate in Larne, County Antrim, has undergone this development.
Despite experiencing initial success, the company has witnessed a significant decline in its share price, plummeting by 98% over the last five years. In 2017, Purplebricks’ shares were adversely affected following a BBC Watchdog investigation that raised allegations of misleading claims made to customers.
In the following year, stockbrokers Jefferies described selling with Purplebricks as a “£1,000 coin toss.” Unlike traditional estate agents, Purplebricks required its customers to pay the fee regardless of whether the property was successfully sold, as highlighted by Jefferies.
Strike, which is supported by Sir Charles Dunstone, the founder of Carphone Warehouse and TalkTalk, and a partner at Freston Ventures, its major joint shareholder, has acquired Purplebricks. Sir Charles Dunstone commented that the deal represents “a favorable outcome for anyone interested in selling their home.”
Source : bbc.com