Purplebricks’ share price has plunged to an all-time low, falling 60% in morning trading to just 2.17p (last updated at 10.50am).
The share price collapse followed a warning this morning by the struggling online estate agency that a sale of the business is leave shareholders nursing losses.
Purplebricks said that while negotiations over a proposed sale of the business were ongoing, ‘the transactions being contemplated, if concluded, would be expected to deliver returns to shareholders materially below the company’s current share price’.
In a gloomy update, the group also issued a warning over its cash reserves, which Purplebricks said would be under threat if its strategic review and sale were not completed soon.
The online-based estate agency said its previous expectation of returning to cash generation in early financial year 2024 was unlikely.
The company has been further hampered by the downturn in the property market in recent months, driven by the sharp rise in mortgage rates deterring many purchasers and vendors.
The group also said the idea of an equity fund raise continued ‘to lack the necessary support’.
Purplebricks told investors: ‘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.’
The company expects to have finished the financial year ending 30 April in line with performance expectations and said a small number of parties remained in discussions with the group regarding the sale of some or all of its business and assets.
However, instruction levels did not increase during its final quarter as expected, at 5,672 compared with 10,964 a year before, which is likely to hit the group’s bottom line at a later date.
Purplebricks’s payment processor for ‘pay now’ instructions has exercised its right to withhold a portion of remittances to the company.
Purplebricks said: ‘This withholding and level of instructions has impacted the Company’s cash position, which as at 30 April 2023 is estimated to have stood at around £9.1m.
Purplebricks endured a turbulent 2022 as it struggled with implementing a new operating model, saw at least three major management reshuffles and one of its top-ten shareholders, Lecram Holdings, call for the removal of Paul Pindar as chairman.
In February, Purplebricks said its board had recognised that the potential of the group may be better realised under an ‘alternative ownership structure’ and had decided to conduct a strategic review. That review would include a formal sale process, the company said in March.
Back in February, the group also said its full-year adjusted underlying loss would come in between £15m and £20m – larger than the previously expected loss of between £8.8m and £11.3m.
EYE NEWSFLASH: Purplebricks’ access to cash under threat as sale update issued
