Former Jefferies Analyst Stands by Purplebricks Call After Drop

(Bloomberg) -- A former analyst whose bearish research report on Purplebricks Group Plc was contested by the online estate agent says he stands by his call, after the stock’s record plunge on Thursday.

In February last year, Jefferies LLC analysts led by Anthony Codling wrote that Purplebricks was selling just over half of the properties it was contracted for, suggesting the company’s model of charging clients an upfront fee could negatively affect demand for its services. At the time, the company took the unusual step of responding in a statement to the exchange.

Fast forward to a year later, and Codling isn’t backing down. “I stick to what I said: Paying up front is a big ask, especially if Purplebricks doesn’t disclose how many homes they actually sell. Sale agreed is not actually sold,” he said by email Thursday, after the company’s shares dropped as much as 39 percent.

The plummet followed revised U.K. revenue guidance from the Solihull, England-based company, to a gain of between 15 percent and 20 percent for the 2019 financial year. That would be a big slowdown from 81 percent growth for 2018, according to full-year earnings released in July. Purplebricks also announced that its U.K. and U.S. chief executives are leaving, and said U.S. and Australian revenue could fall short this year, in a statement on Thursday.

Purplebricks charges a fixed fee of between 899 pounds ($1,176) and 1,399 pounds upon instruction, depending on geographical area, according to its website. Current political and economic uncertainty in the U.K. makes sellers even more skeptical about paying upfront fees, Codling added. He had reiterated doubts about Purplebricks in July, saying its business model was unproven.

Codling is now chief executive of Rummage4Property, backed by homebuilders including Barratt Developments Plc and Persimmon Plc. Asked whether his new company stands to benefit from homeowners bypassing estate agents like Purplebricks, Codling said the company is “pro-estate agent, whether or not they are on the high street” and “our aim is to help estate agents, traditional and on-line, win more instructions.”

A spokeswoman for Purplebricks said by email that the company has no comment beyond Thursday’s statement. Sam Cullen, who co-authored the Jefferies research report last year and is now with Berenberg, declined to comment when reached by phone.

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