A would-be activist has written a second open letter to shareholders of OnTheMarket Plc, launching a scathing attack on the running of the property search portal and its decision to snub his investment bid.
Brett Stone, a former partner at US investment bank Cantor Fitzgerald LP who now runs his own holding company, told the press says that he offered to invest more than £50m in new shares last year, but had his proposal rejected.
Stone, who claims the firm’s failure to retain customers is diluting stakeholders and handing greater market share to rival portals, Rightmove and Zoopla, is stepping up efforts to put greater pressure on OTM with a follow-up letter.
He claims that OTM’s management risks “destroying value” if it continues on its existing strategy, a noting that the property portal also rejected a “friendly proposal” for new investment.
Stone, formerly a partner at New York-based Cantor Fitzgerald, which provides investment banking, brokerage and fixed income dealing services, founded Truckstone earlier this year. It is an investment firm which is focused on “companies which incrementally improve the property commerce category at scale”.
OTM shares edged up 0.6% to 53.30 pence each yesterday, but have has lost 42% in value over the past 12 months.
“Its core portal product is in decline. Its new products appear to be complex, underfunded and underdeveloped. Furthermore, they appear to lack compelling business cases and a strong overall customer value proposition. Without proper investment by OnTheMarket in its products, teams, and business, it is likely in my opinion that OnTheMarket will continue to lose customers and destroy value for shareholders,” Stone said.
The company is also “irresponsibly diluting shareholders”, the investor argued, noting it has issued 5.5 million new shares and granted 5.4 million options since the start of last year.
“This takes the total new shares issued since IPO to approximately 19.5 million and the total options granted to 13.2 million. A combined total of 32.7 million new shares and options, an increase of approximately 50% on a fully diluted basis since IPO. The majority of these shares and options have been issued to insiders and new customers who have not had to pay for them or will not pay for them in the future,” Stone added.
OTM is also struggling to retain estate agent numbers, devaluing it in the eyes of advertisers and therefore increasing “Rightmove’s pricing power”, Stone said.
Stone continued: “I do not say these things to be negative, my goal is for OnTheMarket and all stakeholders to be better informed and better off. For this to happen, I believe honesty and candour with all stakeholders is the only way to go. With honesty and proper investment by OnTheMarket in its products, teams, and business, OnTheMarket can likely succeed. Without these things it will not.
“Back in October I sent a friendly proposal to OnTheMarket’s board offering them the capital and digital market expertise required to deliver attractive returns for shareholders and simple compelling products for customers at speed and scale. The proposal included a significant investment in new ordinary shares and was a win/win/win solution for shareholders, customers and employees.”
That proposal, which would have needed shareholder approval, required “no additional capital or commitment” from other investors. Stone said the proposal would not have resulted in OTM surrendering its public listing.
Stone added: “My expectation was that the board members and I would have a confidential discussion about the specifics of the proposal and how the additional capital and expertise would benefit shareholders, customers and employees. Then, subject to mutual due diligence, you and all shareholders would get an opportunity to properly consider and then vote on the proposal at a general meeting.
“Unfortunately, OnTheMarket’s response was ‘we have no interest in receiving or discussing any proposal of any kind’. This is a position they have stuck to while losing estate agent customers, irresponsibly diluting shareholders, granting options to insiders, launching poorly planned, underfunded and complex products, watching customers spend on portals increase, and watching OnTheMarket’s share price decline.”
OnTheMarket has declined a request from EYE to comment.
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