Analysts from investment bank Berenberg have warned last Friday that the self-titled industry disruptor will need to exit the Australian & US markets if it wants to survive.
The German private bank said in a note:
“Having flown too close to the sun, with operations in five countries and cash burn of circa £7 million [$12.9 million] a month, we believe the group will be forced to seek additional equity at a significant discount or a doubtless expensive debt facility; or to abandon the Australian and US operations and retrench to the UK and Canada,”Berenberg Investment Bank
Purplebricks hit back however, saying they are still considering strategies to boost the business in Australia, with the company’s global COO saying:
“Our transformation over the last six months is bearing fruit, and we are pleased with the recent growth in instructions and sales. Recently, we have boosted our agent numbers and expanded to new regions, bringing our proposition to more Australians.”Purplebricks Global COO
Despite management at Purplebricks insistence that the company has a bright future, many investors in the company and industry commentators have questioned the business model.
Anthony Codling, a former analyst at Jeffries, was critical of the company charging upfront fees, “especially if Purplebricks doesn’t disclose how many homes they actually sell. Sale agreed is not actually sold.” he said.
Disruptors Falling Short In Aus
Purplebricks failure to succeed in Australia isn’t unique, as the country faces one of the toughest real estate climates in memory, many other disruptors are also facing headwinds.
In December last year, DIY home sales website BuyMyPlace was sold for just $100,000 to accountancy firm KordaMentha, owing $5m to creditors.
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