Redfin Finalizes Terms For $120 Million IPO

Jul. 26, 2017 11:34 AM ETRedfin Corporation (RDFN)10 Comments

Summary

  • Redfin is readying its $120 million IPO at a $1 billion post-IPO market capitalization.
  • The company operates an online residential brokerage in the U.S.
  • Given its growth prospects as a technology-enabled brokerage in a growing residential housing market, I view the IPO as a BUY.

Quick Take

Online real estate broker Redfin (NASDAQ:RDFN) is putting the final touches on an IPO of $120 million, as it intends to sell 9.23 million shares at a midpoint price of $13.00 per share

Redfin has developed a technology-enabled residential real estate brokerage firm that provides buyers and sellers with a range of lower-priced, online-centric services.

I view the IPO as reasonably valued, given Redfin's hybrid brokerage-technology position in the market, its growth rate and future prospects for continued growth.

Company

Seattle, Washington-based Redfin was founded in 2004 and launched in 2006 to develop a technology-powered platform that assists consumers in buying and selling homes.

Management is headed by CEO Glenn Kelman, who has been with the firm since 2006 and was previously a co-founder and VP Marketing and Product Management of Plumtree Software.

Below is a brief overview video on selling a home with Redfin:

(Source: Redfin)

The company has raised in excess of $165 million from private investors in several rounds of funding. Investors include venture capital firms in the Northwest U.S. as well as private equity firms and corporate investors.

It’s most recent funding round was in December, 2014, a $71 million Series G round at an undisclosed valuation.

Interestingly, Redfin hires its ‘lead agents as employees, rather than as independent contractors, and there [it] incurs related costs that [its] brokerage competitors do not, such as base pay, employee benefits, expense reimbursement, training, and employee transactional support staff.’

Market and Competition

According to a July 2017 IBISWorld market research report, the market for real estate brokerage services in the U.S. is approximately $158 billion across all sectors (including leasing) and grew at a 9.1% annual growth rate from 2012 to 2017.

In the aftermath of the 2008 financial crisis, the residential housing industry has rebounded

This article was written by

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