Purplebricks’ shares plummeted almost 11 per cent today in the wake of its chief executive’s resignation and admission it has expanded too quickly.
The online estate agent’s share price dropped 11.9 per cent yesterday to 119p as the news broke that Michael Bruce was stepping down immediately to be replaced by COO Vic Darvey.
Shares continued to sink this morning, falling 10.6 per cent to 106.4p per share today, as the company revealed in the same update that it would retreat from its international bases.
Saying it will pull out of Australia, Purplebricks yesterday warned: “Market conditions have become increasingly challenging. This, combined with some execution errors, has resulted in the business not delivering the progress the board expected.”
It will also scale back investment in America as it fights to cut expenditure, promising to rethink its expansion strategy.
Darvey said: “Our proposed strategic review will allow us to determine how we deliver the next phase of growth in a more effective and cost-efficient way.”
AJ Bell investment director Russ Mould told City A.M. that Purplebricks’ curtailed overseas ambitions “knocks a big hole in the investment case”.
“Some of them may just be deciding to give up on the company, especially as the latest reverse comes very soon after February’s profit warning and the departure of the heads of its British and American arms,” he added.
“What the company needs to do know is really prove that its operating model works in the UK, as it needs to silence the growing number of doubters who argue that its upfront-fee model may not have mass-market appeal.”
The company has reaffirmed reduced revenue guidance of between £130m and £140m, down from its original prediction of £165m to £175m.
However, Mould added that recent price data suggesting Canada house prices are softening means the “Canadian market could therefore be about to become a lot less helpful”.