Purplebricks (PURP) has announced the appointment of Citigroup Global Markets as joint corporate broker to act alongside existing broker Peel Hunt. If that is not a sign that a fundraise is coming, I don’t know what is. Axel Springer bought up the old management’s shares the other day at £1 a pop, leading to speculation that it would bid for the rest of the company. Of course, with Neil Woodford keen to offload anything he can (despite still claiming not to be a forced seller), if Axel wanted to mount a bid it would have approached Neil to see what he might accept (maybe 70p a pop?) and then launched a bid at £1 when everyone found out that Woodford had dumped at the lower price. Indeed, even at £1 a share it would have made sense – and I daresay Neil would have ripped Axel's arm off. But that has not happened.
We all know there is a fundraise coming – see HERE – but the timing had been uncertain. If Purplebricks did not need more cash, then why waste money on a second broker? And having told the market that its full-year results will be released on 3 July it will have to satisfy its auditor that it is a going concern – ie has enough cash to survive a year from then. So I expect a fundraise before then.
With zero revenue visibility, the US in turmoil (and surely set to be shut down) and Australia already being terminated, the bills for redundancy must be piling up, not to mention funding ongoing losses. With Axel having ponied up £1 there is no chance anyone will want to pay more under those circumstances – indeed a healthy discount seems far more likely. And with its market capitalisation now having slipped to just £317 million, the sort of fundraise Purplebricks needs will demand a decent discount. Or maybe the company will effectively force its own shareholders to pony up in a very heavily discounted rights issue. Whatever, Purplebricks was a sell before and now it is slam-dunk. There is no rescue from Axel Springer coming.
The other thing is that this could be extremely bad news - as if he needs any more - for Neil Woodford, who is stocked up to the eyeballs with Purplebricks shares and has no cash. And that means yet another spanking for his poor investors in the Equity Income Fund lobster-pot, WPCT and his rapidly shrinking (due to the ongoing tsunami of redemptions) Income Focus fund. Meanwhile, a TR-1 recently released shows that Woodford dumped 2.25% of Purplebricks - but he still has 19.25% to go. Like I said the other day, the scandal over EIF is going to get very messy indeed. No buyers, a fundraise on the way and a despearate seller at around £1 (who was buying all the way down from £5). What's not to like?
Filed under: Purplebricks, Mporium, Julie Meyer, Neil Woodford, Ted Baker, On The Beach
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