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OnTheMarket ‘will not succeed as public company’, City analyst tells investors

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A city analyst has questioned the chances of OnTheMarket succeeding as a public company. Meanwhile, the biggest losers appear to be those agents in breach of their contracts to Agents’ Mutual, who have had their membership terminated and will not receive new shares.

Anthony Codling, an analyst for Jefferies, said yesterday in a note to investors: “So will Agents’ unmutual be more successful than its former mutual self? We think not.”

Jefferies advises Zoopla, including on Zoopla’s own highly successful float three years ago, when Zoopla was reported to have 19,000 agents and developers paying to list on it.

As EYE reported yesterday, the vote was overwhelmingly (89%) in favour of Agents’ Mutual demutualising.

The Initial Public Offering (IPO) is intended to raise £50m, with the new company likely to be valued at between £200m and £250m.

The money raised will go towards marketing, including TV advertising.

The IPO will also facilitate the issue of new shares to encourage the recruitment of new member agents.

However, Codling queried whether a one-off raise of £50m would allow OnTheMarket to achieve its aims, “when Rightmove and Zoopla combined spend a similar amount on marketing annually”.

He went on to pose further questions, including whether OTM would hike advertising costs for agents, and why were agents leaving.

He also asked what the election turnout was, and whether there is room for a third portal.

He concluded: “We don’t expect Rightmove will lose much sleep over the vote, and the dropping of the One Other Portal rule (the rule so expensively defended by Agents’ Mutual a few months ago) would appear to benefit ZPG more than OTM.

“To succeed, OTM needs the critical mass that has so far eluded it.”

Meanwhile, the big losers look to be those member agents in breach of their listing agreements with Agents’ Mutual.

Letters have gone out to them warning that if they had not rectified all aspects of the breach by the end of August, their membership will have been terminated. They would not have been eligible to vote on the members’ scheme, and nor will they receive new shares.

However, their listing agreements will remain in force, and both their previous amounts owing and future amounts will be due and payable.

It is not known how many agents are still in breach but we understand that the figure of 600 was mentioned at one of the roadshows.

Yesterday evening, a spokesperson for OTM told us: “Under the company’s articles, Agents’ Mutual may terminate the membership of any member in breach of their listing agreement.

“In the members scheme documentation we sent out in August, we explicitly alerted members in breach of their existing listing agreements that if they did not choose to rectify their breach or enter into a new listing agreement by August 31, they would have their membership terminated.

“Their existing listing agreements with Agents’ Mutual remain in force and Agents’ Mutual reserves all its rights under these agreements.”

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Source:: OnTheMarket ‘will not succeed as public company’, City analyst tells investors