Neil Woodford-backed online estate agents Purplebricks raises £58m in junior market AIM listing

 
Madeline Ratcliffe
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Internet Companies Vie For Market Dominance
Purplebricks will have a market cap of £240m when it lists on AIM (Source: Purplebricks)

Purplebricks, the online estate agents backed by superstar investor Neil Woodford, has raised £58m in a share placing ahead of its listing on London's junior market.

The estate agency, which combines online listings with local property experts to guide buyers, is expected to float on the Alternative Investment Market (Aim) with a market capitalisation of £240.3m, and will raise £58.1m before expenses. The company will net £25m, and approximately £33.1m forshareholders selling their shares.

Purplebricks, which was founded in April 2014, said its revenue at the end of September 2015 was 10 times higher than the previous year. It has doubled its market share in 12 months.

It will use the proceeds of the placing to invest in new software and technology to help improve its market position, particularly focusing on London and Scotland. It also wants to raise the profile of the brand, and use the cash to help "retain, attract and incentivise employees".

The largest single stake is held by Woodford Investment Fund and Woodford Patient Capital Trust, which control 28.68 per cent of the shares through Nortrurst Nominees, down slightly after the placing from 30.62 per cent.

Fund manager Neil Woodford bought his 30 per cent for £7m last summer, it was his new fund’s biggest investment in a private firm.

Co-founder and chief executive Michael Bruce's stake will fall from 23.94 per cent to 17.03 per cent after admission.

Old Mutual Global Investors, Artemis Asset Management, and Fidelity affiliate FIL Investments International all bought shares.

Bruce told City A.M. Purplebricks had benefited from working with experienced investors, "who are much cleverer than me and belive in what we do.

"[The placing] has been great. We've worked very hard, met many characters, who have embraced what we're trying to do and achieve and are supportive for future."

He added: "Working with Neil Woodford was interesting. What he liked about Purplebricks was our principles, and how we're trying to change the market. He's tried to make investing more transparent, and we have the same aims."

Bruce added that Purplebricks stood out because it offered better value than traditional estate agents, whose fees amount to more than £4.4bn annually, averaging at £4,000 a sale, one to three per cent of the price. Purplebricks charges an average of £1,080, based on a flat fee.

He said:

We've built a new model, which differentiated us. It's a funny old world around estate agency, but we're trying to change this, change the model. It's about making people likeable, valuations which are more realistic, and ending 'no sell, no fee' models, which make people greedy and are unfair for sellers.

"The advancement of technology made it possible," he added, "it allows cash to transfer instantly, customers to engage in the market 24/7 from anywhere in the world. It allows buyers and sellers to be updated instantly, it makes it more convenient, you can view when you want."

Trading on Aim is expected to begin on 17 December.

Zeus Capital is acting as the company’s nominated adviser and broker.

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