Shares in listed property portal Rightmove (RMV) tumbled 12% on Thursday on news that New York-listed property group CoStar had struck a deal to acquire its AIM-listed property portal rival OnTheMarket (OTMP). At the time of writing shares in RMV are down 12.2%.
According to Sky News and subsequent reports, CoStar is offering 110p for each OTMP share, valuing the firm at around £99 million. This is a pricing premium of 56% to OTM’s closing price of 70.50p on Wednesday. Shares in OTMP jumped 55% to 108.98p in early dealings on Thursday.
For CoStar, the deal is an “attractive strategic entry point” to enter the UK residential property market, a release said.
Analysts have seen the move as a threat to Rightmove’s position in the property listing space. But Bank of America analysts say this may prove more difficult than the market is assuming:
“The news could initially be taken negatively for Rightmove, given the risk of OTM securing the backing of a potent owner […]. That said, unseating incumbents in the classified space is no easy feat.” The investment reiterates its “Buy” rating for Rightmove in its Thursday morning note.
Rightmove shares are off nearly 4% this year. Founded in 2000 by the then-biggest four corporate estate agencies of the day, Rightmove was handed serious tailwinds by rising property values, internet momentum, and a resulting so-called “network effect”, which drew other estate agents to advertise on its platform – initially for free. It floated on the London Stock Exchange in 2006.
However, in its two-decade-plus history, it has also faced substantial headwinds, notably around the financial crisis of 2008, and more recently in 2022, when chief executive Peter Brooks-Johnson stepped back from his role ahead of what was widely anticipated to be a more difficult period for house pricing and sales.
As such, the company’s exposure to the UK’s cyclical housing market, rising interest rates, and the very emotional relationship Brits have with their hopes of capital appreciation, make its share price particularly vulnerable. The world of property portals is also extremely competitive, as today’s news story makes ever more obvious.
The company is not the only one suffering amid such exposure, however. This week we’ve had gloomy updates from the likes of house builders Bellway and Barratt Developments, which have underlined the weakness in demand in the UK housing market.
Throughout the summer, investors and savers have also been greeted with a wave of negative news about the property market itself, showing average rents rising to fresh record highs outside London, amid a slowdown in property sales. The publisher of some of that data? Rightmove.
