Purplebricks nears collapse as sale falters and money runs low

Purplebricks has given its most pessimistic trading update yet, admitting its effects to find a buyer are tanking and its financial position now near collapse.

The online agency - which had already said it would sharply cut back its already-small lettings operation - said on February 17 that it was seeking a buyer, in an operation it called a ‘strategic review and formal sale process.’

The agency has now given its shareholders a dire warning with a statement saying: “The Formal Sale Process has been ongoing since 1 March 2023, and in this time the Group has engaged with a significant number of potential offerors, both via outbound and inbound approaches. 

“The Formal Sale Process has involved several rounds of bidding designed to identify the most credible potential offerors, considering both the value being offered to Purplebricks' shareholders, and the ability to deliver certainty for the Group and its stakeholders in a short timeframe.

“Presently, a small number of parties remain in discussions with the Group in relation to the sale of the Company or some or all of the Group's business and assets. 

“Negotiations are ongoing, however, at the current time, the transactions being contemplated, if concluded, would be expected to deliver returns to shareholders materially below the Company's current share price.  There can be no guarantee that these negotiations will result in any such transaction, and there can also be no certainty on the timings or level of any return to shareholders.

“Given the expected level of potential returns to shareholders the option of an equity fund raise has been revisited but is still considered to lack the necessary support. The Board with the assistance of its advisers will continue to engage with shareholders to understand their views on the options for the Group.”

Sale instructions by house movers have predictably plummeted - to 5,672 in the final quarter of its financial year, compared to 10,964 a year earlier - and says its payment processor for ‘pay now’ instructions has withheld some funds because of Purplebricks’ uncertain future.

The statement to shareholders goes on to warn that should the agency fail to agree revised terms with the payment processor handling its pay later instructions, or should those terms be disadvantageous, “this would accelerate the group's utilisation of its remaining cash reserves.” 

In other words, it’s running out of money.

And it adds: “Any further increased rate of withholding by the group's payment processor for pay now instructions would also accelerate the [agency’s] utilisation of its remaining cash reserves.”