Purplebricks continues to face serious problems as key financial backer, and leading City fund manager, Neil Woodford reduced his investment over the course of two days.
The move forced him to apologise to the investors in his Equity Income fund, which has been frozen to investors. He initially reduced the stake in the company from 28.9% to 23.87%, then followed this with a further fall to 21.51% of the business.
This follows the ousting of Purplebricks co-founder Michael Brice from his position as Chief Executive in early May, as reported here.
Woodford’s financial situation
The problems Woodford is facing are due to a dramatic fall in Purplebricks’ share price over the past year.
However, Woodford’s fund hasn’t lost any money on these shares, as despite a fall from a peak of 513p a share to just 106p, a reduction of almost 80%, the price is still trading at 2.6% above the price he paid for his 29% shareholding back in December 2015.
And the reduction in shares has helped Woodford to prop up his other struggling investments by around £16 million.
In an unusual move, Woodford has released a video where he states ‘I’m extremely sorry that we’ve had to take this decision, we will keep our investors informed. We will use this time to reposition the fund.’
He said the fund needed time to reduce its exposure to illiquid and unquoted shares ‘to zero’.
Axel Springer
With this reduction by Woodford, the digital media arm of German publishing firm Axel Springer is now the largest shareholder in Purplebricks, owning 26.6%.
Axel Springer, which owns a wide range of titles, including Rolling Stone and Insider Business, this week purchased 43,622,417 shares in Purplebricks for £1 each, a significant drop. This was an increase from 12.4%.
This amount of shares purchased coincides roughly with the amount of shares sold by the organisation’s founders, Michael and Kenny Bruce, and Michael’s wife Isobel, who have sold their entire holding of 11.02% in the business.
This increased shareholding follows the German company’s investment of £125 million into the business last year, which was used to fund the organisation’s expansion into international markets.
When Axel Springer announced the acquisition of 43.7 million Purplebricks shares on Monday, it said that ‘Purplebricks underlines the attractiveness of this model with its business in the UK showing convincing revenue and profitable growth despite a challenging market environment.’
Toscafund
Hedge fund Toscafund has also increased its stake in Purplebricks from 5.64% to 10.11% through the purchase of the funds from Woodford. This was shortly after purchasing three million shares in May 2019.
They are currently involved in a takeover bid for e-Prop, owner of easyProperty the Guild, and Fine and Country.
The saga continues
In a further twist in this story, the Daily Mail is reporting that it has been told that Axel Springer is ‘open to opportunities’ to purchase further shares. This could suggest that there may be bids to take over Purplebricks in the near future, with Axel Springer the current favourite.
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