PAUL SCOTT comments - Stockopedia - PURP13 Dec 2021 09:35
My opinion - PURP has a substantial cash pile, so the question is how much of that cash is likely to be squandered dealing with these various own-goal legal claims? If it’s not going to bankrupt the company, then there’s still value in the equity.
My worry is that this latest issue could possibly blow up into a situation where anyone who had a tenancy through PURP could try it on, and make a claim. The Telegraph article suggests that even if tenants have not suffered any loss, they can still claim 3-times the level of their deposit from their landlord, if the landlord didn’t serve the correct legal paperwork - which it seems PURP should have done on their behalf, but didn’t. How long do these legal claims, and uncertainty drag on for?
The obvious (and probably sensible) decision is to avoid PURP shares altogether. However, I do think there is some value in the shares, because of the cash pile, and that PURP is still the best-known (by far) online-only estate agent, with very high brand recognition. Is it tainted though? As we’ve discussed here before, the business model of charging up-front fees, leaving behind a long tail of disgruntled customers whose properties didn’t sell, might have gradually eroded the attractiveness of its brand? Also, there’s evidence that conventional estate agents have been fighting back against the online-only upstarts.
On balance, I feel this can only be seen now as an uncertain special situation. With plenty of bargains around right now in small caps, we don’t need to get involved in complicated, problematic shares like this, in my view. There again, sometimes being brave, and buying problematic companies can pay off. So who knows?
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