Last month, the companies had said they were in discussions for a possible all-share merger.
Shares in Countrywide plummeted 47% to 87.2 pence by 1119 GMT after the news, while LSL dropped 13.4% to 214 pence.
Countrywide said it had seen an uptick in public sentiment through the early part of 2020, which reflects the general mood of the market after PM Boris Johnson’s landslide victory in the December elections.
According to a survey from mortgage lender Halifax, British house prices rose in February for the fourth month running, adding to signs of renewed confidence in the housing market that had slowed down in the past few years on worries around Brexit.
Countrywide said it remained confident in its underlying business as an independent company.
It added that it has seen some softening recently due to the coronavirus pandemic, although it was too early to assess any impact.
LSL and Countrywide did not provide further details on the merger.
Reporting by Samantha Machado in Bengaluru, Editing by Sherry Jacob-Phillips and Uttaresh.V