What does Agents’ Mutual’s proposed flotation mean for agents?

I hate to be the guy to say ‘I told you so’…but I told you so! It seems that my predictions from yesterday were pretty accurate and that Agents’ Mutual is now seeking to raise funds in the public markets, having exhausted their ability to raise further funds from within the industry. More troubling, though, is that my prediction from three years ago appears to be true - that it was always the plan for this project to enlist the efforts of the agent masses but really to benefit the main players behind Agents’ Mutual.     

What we have learned in the last 24 hours is that Agents’ Mutual is looking to get its members to vote on September 6th in favour of a major change of direction by abandoning everything that it claimed it was set up for – by agents for agents, mutual and equal ownership, reducing marketing fees and not for profit. By the very nature of taking on external shareholders, all these promises must and are being broken.  

The original mistruth was to believe that all agents were going to be treated equally. I pointed this out at the time and said that AM would get their agents to drop Rightmove or Zoopla, put up OTM window stickers and damage their businesses whilst getting them to believe it was in their own interests. This project was always about the self-interest of a few in the industry, and they are no longer hiding this at least.

Now they appear to be backtracking on things they said at the start. First, they appear to be saying that actually all agents aren’t equal and you will only get shares equal to the amount you have put in so far. So if you have one branch you are now about 1/100th as equal as you were promised when compared to, say, Savills. And, second, they appear to be saying that you will get shares equal to the value of the 2 and a half years’ fees you have paid so far, but only if you commit to pay fees for another 5 years for supporting something that has failed to deliver.

As one City analyst pointed out today: ‘Some members are more equal than others…it appears that the one member one vote does not lead to one member one share. Ordinary shares will be issued to members 'reflecting, amongst other factors, the aggregate amount of fees they have paid in order to list on OTM since its launch in January 2015'. Another City analyst this morning stated: ‘Agents are being asked to commit to a further five years of a project that has fallen flat for c30 months thus far. We estimate that OnTheMarket agents have been spending c£350-400 per month – the same price as Zoopla – for around 10-15% of the leads…We believe that the prospect of ongoing subscriber fees and a further five-year commitment to what is undeniably a worse product today, is a hurdle for member commitment at the vote.’

An example using my basic maths skills. If I have one branch that has paid £350 per month to AM since launch, I will have spent £10,500 so far. I was promised that the £350 pm would go down over time. Now I am likely to be told that I can have my £10,500 back in shares (perhaps with some restrictions on when I can sell them?) but only if I commit to spending at least £21,000 and perhaps more over the next 5 years!    

The national press has also been openly critical of Agents’ Mutual, with Russell Lynch (writing in the Evening Standard) asking whether anyone would “buy shares in something that lagged a distant third behind two competitors and had never made any money?” He calls the offer on the table from Agents’ Mutual an “unappetising prospect” and advises investors to stay away from investing when OnTheMarket is floated on the Alternative Investment Market. Instead, he says, investors should keep their cash in the divi-paying, profitable market leader (Rightmove) or the diversified divi-paying rival (Zoopla). By contrast, he describes the AM float as looking like a dog with fleas.

Question time

Obviously a lot more will be uncovered over the next week or so as Ian Springett embarks on his roadshow to members, but for those who have serious reservations about the direction of Agents’ Mutual and OnTheMarket, below are my top 10 questions to pose to him if you plan to attend one of these meetings:

1. Why the change in strategy if everything is going so well, as he has continually stated?
2. What about the clear failure to achieve any of the stated aims over last 2 and a half years?
3. What about lower fees/not for profit - this is now impossible with external shareholders? 
4. How do you justify saying equal shares/votes and now founders will get far more shares?
5. What restrictions, if any, will be placed on the sale of shares that you plan to issue?
6. What does the new 5 year contract look like – reducing fees over time or increasing?
7. Why would I pay for 5 more years for something without guarantees it will deliver?
8. How do you justify a business that relies on forcing agents to pay if they don’t want to?
9. Why would I pay 5x-10x more per lead than market rate based on performance to date?
10. How many shares will you have, Mr Springett, and how much do you stand to make?

*Simon Shinerock is Chairman of Choices Estate Agents. For more information on Simon, see his blog or his LinkedIn profile.