iProperty Group Ltd plunges 8%: is now the time to buy?

REA Group Limited (ASX:REA) has increased its exposure to South East Asia property markets.

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iProperty Group Ltd (ASX: IPP) has been one of the most volatile stocks on the ASX over the past 12 months. The company’s share price has fluctuated wildly between $1.74 and $4.04 and on Thursday closed at $2.59, following a fall of 8%.

Major Shareholder Investment

The fall wiped out essentially all of the 12% gain on Wednesday following the purchase of a Hong Kong business owned by major shareholder REA Group Limited (ASX: REA). The purchase of Squarefoot, for 5 million iProperty shares, complements iProperty’s existing GoHome site in Hong Kong.

The effective purchase price of around $15 million is negligible compared to the market capitalisation of both companies but increased REA Group’s stake in iProperty by around 2% to 19.43%.

Is it time to Buy?

I believe that long-term investors pushed up the share price Wednesday and short-term speculators are the reason for the drop yesterday. The purchase should be positive in the long run as investors will be drawn to the company by REA Group’s holding because it provides external validation of the group’s business and will always generate rumours of takeover activity.

iProperty is a good company and has solid growth prospects but hasn’t qualified as a Foolish investment just yet.

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Motley Fool contributor Andrew Mudie does not own shares in any companies mentioned. You can find Andrew on Twitter @andrewmudie

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