By Trevor Abrahmsohn, OnTheMarket.com Founder and Glentree International CEO.
The OTM/CoStar issue is certainly reaching a crescendo and we will all see if the disparate group of shareholders will be able to resist jam today for a possible jamboree tomorrow.
There is no question that for OTM to do a deal with CoStar will equip the newly acquired company with nuclear firepower and guess which portal will then be in their crosshairs ……. you’re absolutely correct, Rightmove.
Rightmove Share Price Slashed
Despite its hitherto unassailable position, Rightmove, with its eye watering 74% profit margin has had its share price slashed by circa 30% which has shaved off more than £1billion from its bloated market cap since the CoStar deal has been announced. No trifling matter I suggest! Even the hardy perennial investment analysts have done a volte-face and changed their investment recommendation from a ‘buy’ signal to a ‘sell’. Hmm, me thinks they sense that a new Sherriff maybe in town.
Could the Rightmove shareholders suffer the fate of the battleship Bismarck which was, in its day, Hitler’s mightiest maritime colossus and which was eventually sunk by the British Navy.
CoStar is offering 110p per share, which is equivalent to £100million, and this represents a very modest 2.5 times multiple on OTM’s turnover. Thin gruel for a company which is far more profitable than the one floated a few years ago.
Although I am the founder of OTM, I’m not resistant to a deal with CoStar or others, I just think that the terms are not properly developed and are far too tame. By an outright sale, not only will the agents be denied any upside but with total control, CoStar will then punish the agents as Rightmove have done so gratuitously to date.
Feudal, Sadomasochistic Relationship
The unacceptable feudal and sadomasochistic relationship that agents have with the two incumbent portals was exactly the reason why I founded OTM in the first place. It has always been difficult for me to understand why the subjugate estate agents are so compliant, yet they willingly supply the portals with the revenue and data from which they derive their gluttonous profits and humongous market value, which between them totals over £5.5billion – go figure!
As a board member of Primelocation.com, yes, we did sell this to the Daily Mail Group in 2006 for £50million and by doing so we all lost out many millions on the subsequent journey, which ended in a £2billion sale of the combined group. However, at least the shareholders gained 300% on their shares which is in sharp contrast to the present deal with CoStar, where the agents are losing 33% of their issue price when the company was floated a number of years ago.
Agents Sold a ‘Pup’
If the deal goes through there will be lots of celebrations in the COSTAR/ Goldman Sachs camp but few amongst the agents, who are being sold a ‘pup’ whilst their future is forsaken.
I just hope that they don’t sleepwalk into this bad deal by default.
I say to the shareholders, stand up and be counted, you have one shot at this, make it a good one and this isn’t it I’m afraid.