Real estate brokerage Redfin jumps in stock market debut
Shares in Redfin Corp soared in their stock market debut Friday as investors bet on the residential real estate brokerage’s growth prospects despite a US housing market that’s been hampered by a worsening shortage of properties for sale. The stock climbed $6.70, or 44.7 percent, to close at $21.70. The gain came against a backdrop of mostly sluggish trading on Wall Street. The major US stock indexes ended mostly lower.
Seattle-based Redfin priced its initial public offering of about 9.2 million shares at $15 each. That was above the maximum offering price of $14 per share that the company listed when it filed plans to go public in June. “They’re a discount real estate broker with a technology edge, so they’re a disruptor, and growing faster than other brokers in the industry,” said Kathleen Smith, a principal at Renaissance Capital, which manages IPO-focused exchange-traded funds. “And they’re gaining market share, which is what’s interested investors.”
The company, which launched in 2002 and adopted the Redfin name in 2006, provides listings of homes for sale online and via a mobile app where users can search for properties and find information on pricing trends, neighborhood data and other details. Redfin also employs agents to work with buyers and sellers in more than 80 US markets. The company says it charges most home sellers a commission of 1 percent to 1.5 percent, compared to up to 3 percent charged by traditional brokerages. While the company’s revenue has been rising, it has booked consecutive annual losses going back to 2014.
For the three months ended in March, Redfin’s loss widened to $28.1 million, compared with a loss of $24.3 million a year earlier. Revenue jumped 44 percent to $59.9 million.
Like other real estate brokerages, Redfin has had to contend with the impact of a housing market that’s been hampered by a stubbornly low inventory of homes for sale.
Despite solid demand in a relatively healthy economy for houses, sales listings nationwide have been steadily declining for more than two years. The resulting shortage has caused prices to consistently rise faster than wage gains, making it harder for more Americans to build up their net worth by becoming homeowners. “Our sales would have been higher if there would have been more inventory,” said CEO Glenn Kelman. “All we can do is try to gain share in the face of that, which is exactly what we’ve done.”
Redfin is one of several real estate-sector companies to go public in the past decade as the nation’s housing market rebounded from the worst downturn since the Great Depression.
Re/Max, a franchisor of real estate brokerage services, made its market debut in 2013. Realogy Holdings, which operates real estate brokerages under brands like Century 21, Coldwell Banker and Sotheby’s International Realty, debuted a year earlier. Online real estate information company Zillow Inc. began selling shares in 2011. Trulia Inc. went public in 2012 and agreed to be acquired by Zillow two years later. Redfin began trading on the Nasdaq Global Select Market under the “RDFN” ticker symbol. — AP