Taylor Morrison Home Corp (NYSE:TMHC), a Scottsdale, Arizona based home construction company, is approaching the unlocking of a substantial number of shares owned by company directors and executives and venture capital firms. The shares will be unlocked on October 6, 180 days after the firm's April 9 IPO hit the market, possibly presenting a short opportunity for aggressive investors.
The October 6 unlocking will permit approximately 80.5% of TMHC's outstanding stock to be potentially sold at some point in the future. These shares are owned primarily by asset management firms, which continue to be under pressure to return capital to their investors as a result of their slower growth and profit during the Great Recession. These firms include Oaktree Capital and TPG Holdings. These firms will likely desire to sell at least some of their shares at the time of unlocking or in a secondary offering in order to generate capital.
The unlocking will also permit TMHC's directors and executives to sell their shares; though they are not under the same type of pressure to sell as the asset management firms above, several may choose to sell in the interest of diversifying their portfolios and for estate planning purposes.
These sales could increase the supply of TMHC stock in a market still leery of housing construction stocks due to rising rates and the still-fresh memories of the housing bubble collapse.
TMHC was founded in 1936 and has grown into one of North America's largest home building companies. The firm builds single family homes and develops land, including the development of lifestyle and master-planned communities.
TMHC is organized into three different regions. The East region includes operations in Houston, Dallas, Austin, North Florida and Western Florida; the West region includes Phoenix, Northern California, Southern California and Denver; and in Canada, all operations are within the province of Ontario. The firm focuses on first and second-time move-up buyers, and builds and designs homes for price points ranging from $120,000 to $1 million. For the year ending December 31, 2012, TMHC closed 4,014 homes across North America with an average selling price of $364,000.
RISK FACTORS FACING THE COMPANY
Housing companies are more vulnerable to economic instabilities than most industries because of the way that consumers view home buying. Consumers are aware of the high costs of homes and are particularly aware of the potential for the price of homes to fluctuate in the wake of 2008. Consumers can pick and choose the right moment to buy a home, and when consumer confidence is low, as it is likely to be in the housing market for the foreseeable future, they simply choose not to buy.
TMHC is faced with a number of national competitors in many of its markets. Some of these competitors have more resources and are better capitalized than TMHC, including D.R. Horton, Inc. (NYSE:DHI), Pulte Group, Inc. (NYSE:PHM), WCI Communities (NYSE:WCIC) and Lennar Corporation (NYSE:LEN). These competitors may be better situated to market their products and to negotiate prices for materials and labor than TMHC.
Disclosure: I am short TMHC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: This article was written for informational purposes and partly based on the company's S-1. Investors should read the company's detailed S-1 and review any possible investment with their investment adviser before making any investment decision.