One of the most common debates around the dinner table or whilst sipping a pint down the local is the safest way for the working man to deploy his wealth. You may have heard the phrase ‘‘you can’t go far wrong with bricks and mortar”. However, if you chose to invest in Purplebricks (LSE:PURP) you really could go badly wrong!
Purplebricks this week announced additional director sells, with the most notable coming from letting director Richard Jaques who disposed of (sold in aggregate) 60,000 shares of 1p each in the company for approximately 480p on average. The bizarre part of this sale was the announcement that on the 27th January 2017 he also sold (disposed) of 50,000 shares. Clever Dick wasn’t alone in his interest to sell down his stock. In March 2017 one of the biggest red flags came when founders of the company (and spouse) sold £24m worth of stock in the online marketing estate agents.
The company has subsequently expanded its business into Australia and more recently the U.S after raising an additional £50m at 220p (with institutional investors) however the surge in its shares was seemingly enough for the CEO and senior management to continue running the warning signs up the flagpole to see who pays attention. I have to say that whilst the concept and idea is one which has performed exceptionally well, the business is yet to break into profits and the net revenue is simply not conducive with the company’s £1.3bn valuation.
The company IPO’d in December 2015 at 100p with a market cap of £240m, after being launched in 2014, into an accelerated growth program, with Purplebricks becoming one of the market leaders in the hybrid and online sector as they tapped into the unique sales through its reach of LPE’s (Local property experts)
We at Valuethemarkets suggest that the current share price of 472p coupled with the recent selling appetite from the company’s founders could indicate further downside. This looks like an obvious shorting opportunity.