Morning!

Quick update on the schedule - Paul is coming back tomorrow. So this is my final write-up of the week.

It's busy in RNS-land. I'll try to punch through a decent number of updates.

Graham



Purplebricks (LON:PURP)

  • Share price: 412p (-0.7%)
  • No. of shares: 270.6 million
  • Market Cap: £1,115 million

Purplebricks Targets California

Starting off with an easy, non-financial RNS, this gives us details about Purplebricks' US expansion plans.

One element it doesn't provide is timing, merely saying that it will launch "later this year".

Purplebricks is targeting California for its US launch due to the state's strong housing and economic fundamentals. According to data compiled by the California Association of REALTORS® and other publicly available information pertaining to US homes sales, California ranks #1 in transactions nationally with total sales commissions exceeding $11.5 billion. As it builds a strong brand presence in California, Purplebricks intends to expand into other key US states via a controlled roll-out strategy with a plan to accelerate coverage, as required.


Hundreds of real-estate agents will be targeted for recruitment, and the formula of TV marketing and technology will be applied.

My opinion: I'm increasingly sceptical of the potential here, and indeed at this stage would be strongly tempted to short Purplebricks at the first sign of trouble (although I'm trying to get out of the habit of shorting anything).

My scepticism was growing when the market cap was at £700 million in February, and peaked recently when it approached £1.2 billion.

The £50 million cash it raised back then won't be enough to bring its US plans to fruition, but, more importantly, I just don't see how Purplebricks is going to become a core part of the real estate market infrastructure.

Unlike the housing portals, it's not a directory. So the network effects don't apply. Its agents have to do the dirty work of creating the ads which are then used on those portals.

The major differentiating factor is the marketing budget, building up the brand name so that more and more people will want to use it - but that marketing budget is the reason for its losses so far.

Whenever it stops marketing so heavily, what is the competitive advantage which will keep people using it? I don't think there are network effects, which sort of…

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