A spat has broken out between Purplebricks and investment bank Jefferies over allegations the online estate agent sells fewer homes than it claims.
The dispute, which concerns the proportion of properties sold on Purplebricks’ website within ten months, first erupted on Thursday when Jefferies compared a listing with the online agent to a ‘£1,000 coin toss’ – basically suggesting homeowners had a 50/50 chance of selling their property.
Purplebricks charges a flat fee rather than a percentage of the sale price, but customers have to pay the fee regardless of whether the property is sold or not.
Jefferies said that Purplebricks’ sales success rate was just over 51 per cent and in line with traditional estate agents, compared to previous claims it sold 88 per cent of homes listed.
Questions: Investment bank Jefferies has suggested online estate agent Purplebricks sells fewer homes than it claims
Analyst Anthony Codling said: ‘Our analysis suggests that Purplebricks’ success rate is near the middle of the pack.
However, although only just over half actually sell their home, everyone has to pay. With a traditional High Street agent, the homeowner only pays if the agent sells their home.
‘A review of Purplebricks’ accounting policies raises concerns to us that either its contractual obligations to its customers end with their home being listed on the major property portals, or revenue may have been overstated and deferred income provisions understated in its audited accounts.
‘Should the model stumble, the share price may do likewise.’
The comments sent shares in Purplebricks down more than 7 per cent on Thursday and forced the firm to publish a statement yesterday refuting the criticism.
Purplebricks argued that Jefferies’ data is based on a single month and did not include properties that had yet to be uploaded to the Land Registry – a process it claimed can take ‘several months’.
STOCK WATCH – IFG
Shares in financial services company IFG plunged after it revealed the full extent of its tax charge and confirmed it had received a number of approaches for its Saunderson House subsidiary.
Last May the firm revealed it was facing a £1.8million tax charge from HMRC over investments in its unregulated biofuel scheme, Elysian Fuels.
But yesterday the company said the charge could be as high as £20million, sending its shares plunging 4 per cent, or 7.25p, to 173.75p.
It reiterated its most recently published sales success rate of 78 per cent, which it claimed more accurately reflects its sales performance.
It added that Jefferies, which acts as a broker to traditional rival Countrywide, had a history of miscalculating its figures, having claimed in 2016 that only 14 per cent of its homes progressed to competition.
But, despite rigorously refuting the note, the estate agent slipped 8 per cent, or 34.4p to 418.6p.
The FTSE 100 finished down 0.6 per cent, or 47 points, at 7443.43 while the FTSE 250 finished down 1.1 per cent, or 223.08 points, at 19962.46.
Aerospace and defence firm Cobham dipped 6.4 per cent, or 7.95p, to 116.8p after revealing it had agreed to sell its test and measurement business to California-based Viavi Solutions for £322million.
The sale is the latest stage of its turnaround effort and comes after it revealed plans in August to sell the units, use the proceeds to reduce debt and further strengthen its balance sheet after a string of profit warnings.
It said the sale of its Avcomm and Wireless test business will enable it to pay down around £440million of debt by combining the proceeds from the deal with existing cash.
Infrastructure and support services company Stobart jumped 1.9 per cent, or 4.5p, to 245p yesterday after announcing the appointment of Richard Laycock as chief financial officer.
Engineering company Wood Group nudged up 0.1 per cent, or 0.8p, to 650.2p after revealing it will benefit from President Donald Trump’s tax reforms.
Energy provider Fulcrum Utility was also given a boost after agreeing to acquire electrical infrastructure firm Dunamis for £22million.
The company, which provided the gas infrastructure to light the Olympic flame at London 2012, edged up 1.7 per cent, or 1p, to 60.2p.
Telford Homes jumped 0.7 per cent, or 3p, to 410p after chairman Andrew Wiseman cashed in £512,000 worth of shares.
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