Online estate agent Purplebricks, which is backed by the prominent fund manager Neil Woodford, is to float on the stock market this month with an expected value of £240m.
The firm, which launched in April last year, has raised £58m from selling shares to institutional investors. The shares are expected to start trading on London’s alternative investment market on 17 December.
The IPO will raise £25m for the company while some of the directors and early backers are cashing in shares worth £33m. Purplebricks is the first of a series of online estate agents to debut on the stock market. By offering a web-based service, they are cheaper than traditional estate agents.
Woodford will remain the company’s biggest shareholder after the flotation, with a stake of 28.7%. Other investors include Paul Pindar, the retired chief executive of outsourcing group Capita, and Errol Damelin, the founder of payday lender Wonga.
Purplebricks currently lists 4,300 residential properties for sale, and said its market share among the top six online estate agents had grown to more than 60%.
Undercutting traditional agencies, Purplebricks charges a flat fee of £665 plus VAT for a sale in the UK, apart from certain London postcodes where it charges £965 plus VAT. There are additional charges for arranging viewings or energy performance certificates.
Unlike many of its online rivals, which include eMoov, Housesimple and easyProperty, Purplebricks has a network of 165 local agents who visit properties and provide valuations and are on call 24 hours a day, although it does not have any branches. It started offering lettings in London in the summer.
Last month, the business launched in Scotland and wants to use the money raised in the IPO to boost its presence there and in London, and to roll out lettings across the UK, by investing in more agents, the brand and its technology.
Michael Bruce, the chief executive and co-founder, said Purplebricks was also looking to expand abroad, such as in the US, Australia or France, where traditional estate agents’ fees are high, at about 5% to 6% of the sale price. He said that as well as being cheaper, his service makes buying, selling and letting property easier and faster.
He said: “You only mention the word estate agent and people smile and have this inner feeling of unhappiness … Our customers have a lightbulb moment. Seventy per cent of our traffic happens when [traditional] estate agents are shut. You can make an offer at seven o’clock at night.”
He and his brother Kenny set up Purplebricks after selling the Midlands-based estate agent Burchell Edwards to Connells in 2011. Along with other members of the management team, they are selling some shares but remain big shareholders in Purplebricks, while two early investors – private equity firms DN Capital and MLC50 – are selling their entire holdings.
Estate agents’ fees on the buying, selling and letting of properties in the UK total more than £4.4bn a year. Traditional estate agents, with a high street presence, typically charge a fee of 1% to 3% of the sale price, on average more than £4,000 including VAT. Purplebricks charges an average fee of £1,080.
