Real Estate

Revolut’s founder should take some M&A lessons from Warren Buffett


Revolut’s founder-chief executive Nikolay Storonsky is preparing to double down on travel just as the world battles with the prospect of lengthy restrictions. He does so as Warren Buffett, the investor from Omaha known for his Yoda-like wisdom, says he has cut his losses and sold all his shares in US airlines for $6bn. The outlook for air travel has changed forever, Mr Buffett told his backers of Berkshire Hathaway at the annual meeting. Nor, said the ukulele-playing Oracle of the Mid West, was there anything out there he wanted to buy instead.

The duo are separated by geography, age and outlook. Octogenarian Mr Buffett is grounded by experience and pulling in his horns.

In the five years since Mr Storonsky, a Russian-Brit and a former derivatives trader in his mid-30s, co-founded Revolut, the fintech toddler has spread into stock trading, current accounts, foreign exchange and cryptocurrencies. Mr Buffett once dubbed cryptocurrencies such as bitcoin as “rat poison”. Revolut wants to expand further, perhaps into car rental and ticketing apps that have been brought low by the travel lockdown. Mr Storonsky talks about flogging airline tickets at cost and cross-selling Revolut’s card services and foreign exchange via its financial “super app”. The group, which is still lossmaking, has hired an M&A team to see what’s about. Martin Gilbert, deal junkie and former boss of Standard Life Aberdeen, is now chairman, too. 

Fortunes are made by opportunists making bets on a recovery when markets are at their most depressed. The Sage of Omaha made a packet in the financial crisis of 2008 by picking off stakes and funding stricken banks Goldman Sachs, Bank of America and General Electric in the US. He isn’t tempted this time. Companies are asking too much, says Mr Buffett who knows how to walk away rather than overpay.

That said, oracles, like Yoda, are famously Delphic. The Sage of Omaha is credited with saying: “Cash combined with courage in a time of crisis is priceless”. Revolut is awash with cash, having serendipitously stashed away $500m in February in a fundraising that valued the company at $5.5bn and set a new high for the fintech sector in Europe. Mr Storonsky has proven skills in making his investors overpay but has yet to prove he can, like the Sage, walk away. 

Revolut’s sky-high valuation shouldn’t encourage him to bet the bank.

Au revoir, estate agents

Spare a thought for the estate agents. Lockdown is making life even more difficult for the UK’s property punters. Britain’s brave estate and letting agents have been remorselessly squeezed since the Brexit vote put paid to runaway house price growth in 2016. 

Countrywide, the UK’s largest group of agents, hasn’t turned a profit since that year. Purplebricks, the online agency set up in 2014, hasn’t made one ever. Foxtons’ aggressive sales techniques have served it slightly better: it has only been lossmaking for the past two years. Only LSL Property Services, the business behind Marsh & Parsons and Your Move, kept in the black in its latest financial year. Now, windows are dark and staff furloughed across the industry.

The housebuilders have been raking in record profits in recent years from Help to Buy. Rightmove, the ridiculously profitable property portal, has been squeezing agents for all they’re worth. Its operating margins have barely budged from 75 per cent or more since 2016. 

Agents are the unloved middlemen. 

They are not the only ones who stand to lose from Covid-19. Mortgage lenders are planning for house price falls of anything from 6.5 per cent to almost 20 per cent this year if their worst fears are realised. Rightmove-rival Zoopla said last week it reckoned demand from buyers was down about 60 per cent from the start of March, even after an April improvement. 

That will hurt. Builders may yet face price pressure from nervy buyers. Rightmove, which charges agents fees for listing properties on its site, has given customers a 75 per cent discount on their invoices for the next four months, which will cost it £75m in revenues, almost a quarter of last year’s sales. The real danger for Rightmove is that agents don’t make it, or demand long-term fee cuts to keep going. 

Even so, Rightmove’s monster margins mean it can survive off its fat. Not the agents. Many have shored up their finances: Foxtons has raised cash, Purplebricks is cutting costs, and LSL, which looked at taking over Countrywide, has thought better of it. 

But if Lloyds Bank’s worst-case scenario of a 30 per cent fall in property prices over three years plays out, agents galore will go under as they did in previous slumps.

Revolut: Kate.burgess@ft.com
Estate agents: Cat.Rutterpooley@ft.com



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