Shares in hybrid estate agent Purplebricks dropped by nearly 6% following the BBC’s Your and Yours programme in which the company’s CEO Michael Bruce defended claims that it had made misleading claims to customers.
Following the programme, which was broadcast at a 12.15pm yesterday on Radio 4, the Purplebricks PLC share price dropped from a high of £4.78p to £3.92p before rallying at 4.38p.
Purplebricks’ share price has been dropping since July 24th when it peaked at an all-time high of £5.13p, but today has been one of the more dramatic drops, dipping by 5.77% or 26.9p in one afternoon.
On 5th July Purplebricks faced criticism from the Advertising Standards Authority following a complaint from West Sussex estate agent Arun Estates, which had complained to the ASA about ‘fees saved’ case studies on the Purplebricks website which it believed were misleading under ASA advertising codes. The complaint was upheld.
During the You & Yours programme presenter Winifred Robinson claimed the hybrid estate agent has been making “exaggerated claims that it’s already been banned from making by the advertising regulator” in emails to existing and potential customers seen by the BBC programme Watchdog.
Purplebricks has been censured six times over the past year by the ASA, including claims made about how much vendors can save if they chose Purplebricks rather than a traditional high street agent.
During the investigation into Purplebricks, it was discovered that vendors who defer their up-front payment to Purplebricks were then entering into a credit agreement or loan with lender Close Brothers, something the company’s agents or LPEs failed to tell vendors in three out of five cases, the BBC found.
Number of listings
The BBC also recorded an LPE claiming to one investigator that he listed 20-25 properties a month and that 92% of these were sold, but it was discovered he was listing 8-11 a month.
NAEA spokesman Paul Walsh told the programme that such claims were at risk of being in breach of consumer protection and trading regulations, and were also likely to be in beach of Property Ombudsman regulations as well.
Michael Bruce, Purplebricks’ CEO, told the You and Yours programme that “at the time those [email] claims were made we took that reference down from over 1,000 different places where it appeared and it has [now] appeared in one place and I was informed about that last night and within an hour it was taken down.”
Responding to the claims that Purplebricks had not told some customers about the Close Brothers’ ‘loan’ credit agreements, Michael Bruce told the programme that it was instead a “facility agreement” and therefore not a regulated product and that customers had to click online to agree to the terms.
Details of the full BBC investigation will be revealed in tonight’s Watchdog programme on BBC1 tonight at 8pm.