A Canadian investment fund with a roughly two per cent share in Foxtons is arguing for the agency to be put up for sale because it has failed to realise value for shareholders.
Converium Capital, in an open letter sent to Foxtons chair Nigel Rich and seen by the Financial Times, says: “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.”
The letter – signed by Converium managing partner Michael Rapps – continues: “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.”
He adds: “Over the last several months, we have engaged with members of Foxtons’ management and Board about opportunities to increase shareholder value, including reducing the company’s cost structure with the goal of returning margins to historical levels, implementing revenue-enhancing initiatives, divesting select non-core businesses and repurchasing shares.
“Unfortunately, Foxtons has continued to underperform. Whereas Foxtons historically generated operating margins of more than 30 per cent, over the last five years the company’s operating margins have oscillated between nil and 10 per cent. We believe much of this margin erosion is due to insufficient cost controls.”
In recent years Foxtons has had as rocky a relationship with its shareholders as it often has had with the wider public.
Last April Foxtons faced a shareholder revolt over the bonus being given to its chief executive despite taking £7m in state Covid support – some, but not all, of which has been returned. The proposal at the time was to hand Foxtons chief executive Nic Budden a bonus of £389,000 along with share awards. Earlier than that, Budden’s total pay package was reported to have been £1.6m in 2020 compared to £1.25m in the previous year.
Then in May 2021 another activist investor – Catalist Partners – published a dossier urging Foxtons to target expansion outside of London, which it claimed had the potential to increase the agency’s market value to £1 billion.
Rich’s predecessor – veteran chairman Ian Barlow – quit in July 2021 ahead of the company acquiring former rival London agency Douglas & Gordon, mostly to realise the value of its lettings operation.
Foxtons has been asked for its comment on the Converium open letter.