London-focused estate agent Foxtons has failed to take advantage of a red hot property market and should sell itself to realise value for shareholders, according to an investor in the company which is launching the second activist attack on Foxtons in nine months.
Converium Capital, a Montreal-based investment fund, has built a stake of around 2 per cent in Foxtons over the past six months, according to people familiar with the matter. The investor surfaced this week, urging Foxtons to exit the public markets in a letter sent to the company’s chair, Nigel Rich, and seen by the Financial Times.
“As the London property market has started to rebound following its Brexit and Covid-19 induced malaise, Foxtons ought to have risen to its potential. Unfortunately, Foxtons has continued to underperform,” wrote Michael Rapps, managing partner of Converium, in the letter.
“Converium believes that the better path for Foxtons is to pursue a formal process to sell itself, and we believe that in a sale Foxtons should command a significant premium over today’s depressed share price,” it read.
Over the past six months, during which demand for UK property has run at historically high levels and both average rental and sales prices in London have increased, Foxtons’ share price has fallen by 40 per cent.
Since an initial public offering at 267 pence per share in 2013, the company’s stock has fallen by close to 90 per cent, closing on Tuesday at 31.5 pence.
A sale could bank shareholders as much as 100 pence per share, according to Converium.
Converium is not the first activist to criticize Foxtons’ strategy. The company spent much of last year fending off criticism from shareholders, 40 per cent of which voted against the approval of an April remuneration report which gave chief executive Nic Budden a cash bonus of £389,000 and shares worth £569,000 — despite Foxtons having claimed millions in government Covid support schemes.
Hosking Partners, Foxtons’ largest shareholder with an 11 per cent stake in the company, has called for “radical change” to the board.
Last May, activist Catalist investor Partners published a dossier urging Foxtons to target expansion outside of London, which the investor claimed had the potential to increase the agent’s market value to £1bn — at that point around five times its market capitalization and now roughly ten times .
Budden has cast doubt on Catalist’s projections and pointed to signs of a turnround at the company.
In January, the agent announced that annual revenues had hit their highest levels in five years, at £133mn, and the company’s operating income was at the higher end of analysts’ expectations at £7mn.
Foxtons also replaced its longtime chair Ian Barlow with City grandee Rich in September and has bolstered its lettings business with the acquisition of rival agent Douglas & Gordon. But those measures have failed to quell shareholder disquiet.
“If the company cannot fix itself, someone else should buy it and do the fixing, said Django Davidson, finding partner at Hosking.
Foxtons declined to comment.