Ian Springett, chief executive of OnTheMarket, is to pick up 3.9m shares in the event of a successful float.
In round figures, should shares trade at between the projected £4 and £5, they could be worth almost £20m in total to Springett.
A trio of documents which EYE has seen and which have been sent to agent members of OTM, state that Springett would receive just over 3.9m shares.
The price put on these is stated in one of the documents which says: “Based upon discussions with Zeus Capital [the OTM adviser on the float], your board believes that the valuation range of OnTheMarket at IP could be between £200m and £250m.
“Should such a valuation be achieved, your board anticipates that the share price at IPO would be in the range of £4 and £5.”
Four un-named members of “key management” and their “immediate families” could also between them receive shares potentially worth almost £20m, should they take up their options for “nil consideration”.
The documents also show that as well as the ‘one other portal’ rule being dropped, it is also proposing to drop the ban on online agents.
The complex documents – being explained at a series of roadshow presentations to OTM agents all this month including one today – spell out that decision day is September 6 at a ‘members’ court’ meeting at 10am at One Wood Street, London, the offices of law firm Eversheds, where each scheme member will be entitled to vote, in person or by proxy.
There is mention of members in breach of their existing listing agreements with OTM, who must return their proxy forms by 10am on August 31 while those not in breach have until 10am on September 4. Those agents currently in default who do not either rectify the breach or enter into the listing agreement by the end of this month will have their membership terminated.
Their existing listing agreements will continue – and OnTheMarket says that their subscriptions will still be due and payable – and, following the recent litigation, chased up and held to account.
The documents confirm that for a successful IPO, members will need to exchange their interest in Agents Mutual for shares in the new company, OnTheMarket Ltd.
Agents will also need to enter a new five-year agreement until 2022.
The papers also confirm that only a minority stake will be offered to investors, with the aim of raising £50m.
Reference is also made to the “highly aggressive response from its [OTM’s] major competitors, including negative publicity and heavy retention price discounting as well as more positive changes in their products and service levels offered to agents and in increased expenditure on marketing.
“In addition, Zoopla joined in the funding of our opponents and provided substantial support in the recent litigation which caused considerable short term diversion of resources from the company’s short term business.
“Whilst OnTheMarket.com has made very strong progress to date with the relatively modest resources at its disposal, it has become clear that a change in strategy, together with much greater growth funding, is needed to allow it to reach its goal of substantial market coverage of UK real estate sales and lettings agents and high levels of brand awareness and traffic to support them.”
The documents say the board has spent the last year reviewing strategic options, but concluded that the money required could not be raised from agents.
The board therefore decided to move to a share-based structure, and to remove the “restrictive term” – the one other portal rule.
On online agents, the documents state: “Your board believes that the time is right to review its listing eligibility with a view to broadening the appeal and coverage of the portal, to reflect major changes in the market landscape and to ensure that it remains compliant with competition law.
“It proposes to drop the policy of excluding agents who offer at least the option of a full service without necessarily providing this from a bricks and mortar high street branch.”
The papers say that since launch, there has been considerable convergence between traditional and hybrid agents: it says the latter have “undoubtedly” increased market share, to around 6%.
The relaunched portal will also, controversially, accept listings from new homes developers, many of whom market large numbers of properties direct to the public and without using agents.
OTM may also introduce special and additional advertising services to create extra revenue “in a measured fashion”. These could, perhaps, include Rightmove-style featured properties.
However, the documents stress that agent ownership and support, as shareholders, will remain crucial to the portal’s future success.
Agents are promised no increases in subscriptions for the next two years, and a maximum annual rise of 5% afterwards.
A majority of 75% will be required to approve an IPO.
Costs will range according to number of offices in location, and will be individually negotiated for agents with 175-plus branches.
For those businesses doing both sales and lettings with a single office, monthly costs will be from £295 to £595. For businesses with between 125 and 174 branches there will be a 35% discount, with costs per branch ranging from £192 to £387. Virtual offices will be charged by reference to where they are, and the size of their businesses.
Last night, we invited OTM to comment on a number of questions we had after reading through the documents, including on Ian Springett’s shares deal.
It declined to do so, but did explain that the 75% vote required involved a technical procedure, based on the total number of members who vote, with those who do not cast a vote not being counted.
We have been asked to clarify that the documents we have seen were not supplied by Agents’ Mutual, its board, PR department or PR agency, and are happy to do so.