The OnTheMarket/CoStar issue is reaching a crescendo and we will all see if the disparate group of shareholders will be able to resist jam today for a possible jamboree tomorrow.
Despite its unassailable position – with its gluttonous 74% profit margin – since the CoStar deal has been announced its rock-solid share price has been slashed by circa 30% which has shaved off more than £1 billion from its bloated market cap.
And I would suggest that’s no trifling matter. Even the hardy perennial investment analysts have done a volte-face and changed their recommendation from a ‘buy’ signal to a ‘sell’.
So could Rightmove shareholders suffer the same fate of the impenetrable battleship Bismarck? In its day, The Bismarck was Hitler’s mightiest maritime colossus but it was eventually sunk by the Royal Navy.
CoStar is offering 110p per share, which is equivalent to £100million, and this represents a very modest 2.5 times multiple on OnTheMarket’s turnover.
I’m not resistant to a deal with CoStar, or others for that matter.”
Although I am the founder of OnTheMarket, I’m not resistant to a deal with CoStar, or others for that matter.
I just think that the terms of this deal are not properly developed and are far too tame.
By an outright sale, not only will the agents be denied any upside but also with total control, CoStar could then punish agents as Rightmove has done so gratuitously to date.
FEUDAL AND SADOMASOCHISTIC
Rightmove and Zoopla are worth over £5.5 billion between them but all of their data and revenue streams are derived from agents’ brethren.
This feudal and sadomasochistic relationship was exactly the reason why I founded OnTheMarket in the first place.
When I was a board member of PrimeLocation we sold to the Daily Mail in 2006 for £50 million. But by doing so, we all lost out many millions on the subsequent journey. However, at least the shareholders gained 300% on their shares which is in sharp contrast to the present deal with CoStar, where the agents are losing 33% of their issue price when the company was floated a number of years ago.
SOLD A PUP
If the deal goes through there will be lots of celebrations in the Goldman Sachs camp but few amongst the agents, who in my opinion are being sold a pup.
I just hope that they don’t sleepwalk into this bad deal by default.
I say to the shareholders, stand up and be counted.
You have one shot at this – make it a good one!