Shares in Countrywide plunged by over 60 percent after the group asked investors for £140 million of emergency funds.
The group launched a “back to basics” turnaround strategy after they had to downgrade profit forecasts four times in just eight months.
Countrywide, which operates under brand names including Hamptons International, will offer new shares to existing investors at an 80 percent discount to their previous value – sending the stock’s market value down 70 percent in early trading.
“The capital structure now is off the table, it is done. When you want to raise £125 million and were able to raise £140 million, that says not only were shareholders supportive, they were over-supportive beyond what we needed to raise,” said Peter Long, the executive chairman.
Long added that he was “delighted” that investors are willing to put up the cash for the new shares that will be sold for just 10 pence.
The executive chairman has partially blamed the company’s issues on the “completely wrong” strategy that was carried out by the former chief executive Alison Platt, who resigned in January.
“It completely destroys the business model by saying it’s a retailer and saying we don’t need management expertise locally. You disempower people, demotivate them and lose key expertise,” said Long.
Laith Khalaf, a senior analyst at Hargreaves Lansdown, said Countrywide had been “damaged by its attempt to bring the sales and lettings businesses together under one roof, and by its centralisation programme, which took decisions out of the hands of local managers”.
“Meanwhile the entire sector has been going through an existential crisis thanks to digital disruption.”
“On top of that, Brexit and changes to stamp duty prompted a 22 percent fall in London property transactions last year, ensuring Countrywide didn’t get away with its wayward strategy.”
“Investors now need to decide if they are throwing good money after bad, though even the best-case scenario is a long road to recovery,” he added.
Rivals have also struggled. Foxtons a £2.5 million half-year loss earlier this week.
Shares (LON: CWD) are currently trading down 13.62 percent at 16.05 (1043GMT).