Purplebricks (LON: PURP) is down 60% on the final admission of defeat from the management. It was a nice try that didn't work out. Partly because of management mistakes, partly because, well, some ideas just don't work out. The best result from here on out is that the company will be broken up for scrap. There might be some small return to equity but that's not certain by any means.
The essential idea seemed like a good one. Instead of selling houses by taking a percentage of the proceeds (English fees are usually in the region of 2% of the sales price) why not charge a fee upfront? A flat fee that is, but get the money at the beginning of the sales process rather than later, at some time after the end of it? Seems like a plan and it did indeed work rather well for some time. Then it didn't and there lies the problem. One part was that attempt to expand into the US (where usual fees are 6%, so it should have worked even better there, but didn't) but that doesn't explain why the business failed here in Britain as well.
Purplebricks share price from London Stock Exchange
Today's announcement is here and the real issue n this short term is that they've run out of money. As with credit card chargebacks they've a financier who is restricting their access to new cash coming in from new signings. There's no other obvious source of more cash to keep it going. And they've been trying to swell for some weeks now. No one is willing to take the whole business. So, it looks like the best result is that it will be broken up for scrap. Which may or may not leave a return to equity.
All of which does leave us with that question of why it did fail. The most obvious thought is that markets which - near everywhere - work on commissions of sale price might possibly do so for a reason. That they align interests perhaps. Or possibly that people about to sell prefer to pay a - possibly larger - fee when they've the cash from the sale, not have to find money in advance.
All we really know before the post-mortem is that Purplebricks was a nice idea that didn't work. Ah well, many don't, so on to the next one.