Tuesday, 3 July 2018

Our take on the new Emoov and its predicted £130m IPO in 7 months time.

The new Crowdcube Emoov campaign has topped its £1m target on day one. £500k of that was from one source. The valuation puts this newco, made up of 3 oldcos, at £104m. 

Wow! and I thought the World Cup was unpredictable. 

The hope seems to be that a £9m spent on advertising will rocket turnover in the next 12 months (for FY19) by 550%. Hmmm. Will it really be that immediate? Turnover has been stagnant recently - hence the merger? Even Purple Bricks, who spent £10m on advertsing in 2017, only saw UK growth at around £150% and that was from a more advanced starting point. 

The IPO is, according to the company, expected to value the company at around £130m and then they hope that the post float euphoria will lift this value by another 300%, as it did with Purple Bricks.

Purple Bricks spent ~£10m on advertising last year and £8m the year before. Can Emoov match that year on year? The winner will be the player with the largest market share and Emoov have it all to do. Purple Bricks have already crossed half of the Rubicon and are producing operating profits. Emoov and its two siblings were all loss making before the merger and two of them had negative balance sheets. PB raised £50m in the City post IPO in 2017. 

If on line estate agents are the future, another whole topic of open debate,  then PB have a considerable first mover advantage.

You will have to excuse me for being a tad reluctant to believe much of this will happen as they plan. I do hate to ruin a party but these numbers, going on the past experience of the 3 companies that have amalgamated to create this newco, seem very generous. The main thrust of the pitch seems to be we can do what PB did or better. Well there is little evidence to back this up and Emoov are starting from 30 yards behind the line. 

On Crowdcube's forum, we are told there is a very telling Q&A. The Q is, how have things gone so far for FY2019. The response skirts around the issue with lots of jargon and paff but does not attempt to answer it. Game Set and Match for me.

There is also the vexed question of EIS. If new SHs buy into this round and the company's planned IPO takes place Q1 2019, these new EIS reliefs will only be valid if the shares are held for 3 years from purchase. Nowhere in the pitch is this explained. In fact in a direct Q on the issue, Emoov prefer to indicate some tax loophole that they think gets around this. It is very simple - 3 years from purchase. HMRC do not consider an IPO an exit. So if the IPO happens and the shares then flop a year later, SHs will have to decide if loss of EIS is better than the holding a falling stock. To retain the relief they are locked in for 36 months. That's not quite the picture being painted on Crowdcube.

Maybe that is misleading - probably not though! It would certainly worry me that the CEO of Emoov doesnt know the EIS regulations. 

Of course the Q1 2019 IPO is perfectly timed to coincide with the crash of all crashes; that is Brexit DDay. Maybe that was the plan?

Strawberry anyone?

1 comment:

  1. PurpleBricks lost ~27.6m last year, and currently has lots of cash to burn.
    I hope emoov can compete as this does seem to be a commodity market.