Rightmove shareholders told to sell shares or face 30% drop
Investment bank Citigroup says competition from new OnTheMarket owners CoStar threatens Rightmove's position.
Rightmove shareholders are being advised to sell after the £100m takeover of rival OnTheMarket last month.
OTM is being bought by global property data group CoStar in a clear move designed to challenge the dominance of Rightmove in the portal listings market.
Multinational investment bank Citigroup has reiterated its recommendation to release Rightmove shares after seeing their value drop from around 588p when the deal was announced to 463p.
More serious
Property experts now see OTM, with CoStar’s backing, as much more serious competition to market leader Rightmove and Zoopla.
“Facing well capitalised CoStar in commercial and residential changes the predictability of Rightmove’s earnings,” Citi said last week, as reported by Sharecast news.
The firepower and ambition of CoStar means it could be trickier this time.”
The bank acknowledged that Rightmove has a “clear lead” in the residential sector, which has helped it come through previous competition challenges “unscathed”.
But “the firepower and ambition of CoStar means it could be trickier this time,” Citigroup said.
30% drop
There is a risk of a drop of more than 30% in Rightmove shares Citigroup says: “We currently factor in limited impact, but see asymmetric share price risk of >-30% in a bear case scenario and +20% in a bull case scenario.”
CoStar plans to spend £46.5 million on sales and marketing in the first full year following the takeover, “as the first stage of a multi-year investment programme totalling hundreds of millions of pounds to drive more consumers to the OnTheMarket portal”.
This is six times what OnTheMarket currently spends and more than three times the current annual media spend of Rightmove.
Luckily over the past two decades Rightmove have not overcharged their clients the estate agents and others, so why would they leave in their droves and deplete the annual gross profit of 70%, which pays shareholders handsomely.
Wait a minute … OnTheMarket’s (CoStar’s) greatest weapon to dominate the portal space in the UK is Rightmove’s perceived and actual arrogance and indifference to its customer base. I have been predicting for many years that RM will get walloped … and by OTM, that was always the obvious vehicle.