UPDATE: Redfin debuted on the Nasdaq stock exchange Friday morning, and it’s stock opened well above the $15 initial pricing.
Shares for the Seattle-based tech-powered brokerage opened at $19.56 Friday morning, and briefly climbed above $20.
About 90 minutes before the stock began trading, the company kicked off a new era as a public company by ringing the Nasdaq opening bell. A fired up Redfin CEO Glenn Kelman thanked employees and customers for helping the company get to this point, but added that it is only the beginning.
“We are excited to be here! This is a big day for Redfin. But it’s not just about going public, it’s not just about making money, it’s not just about building a great business, it’s about making real estate better for regular people,” he said. “We have done it our way, with real estate agents and software engineers working together as partners, where we are one Redfin.”
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Redfin priced its initial public offering at $15 per share on Thursday night, above the anticipated range, signaling strong interest in the tech-powered real estate brokerage in advance of its likely Wall Street trading debut on Friday.
The Seattle company is raising $138 million on its quest to transform how people buy and sell homes across the U.S. It becomes the first company from the Seattle area to go public this year. Redfin initially planned to sell shares in the $12 to $14 range.
Redfin, which filed to go public last month, plans to trade on the NASDAQ under the ticker symbol “RDFN.” Shares likely will begin trading on Nasdaq on Friday morning, with the general public able to buy shares at that time. Underwriters who helped guide Redfin public have the option to purchase an additional 1.38 million shares.
MarketWatch reports the company is seeking a valuation of $1.2 billion. By comparison, Seattle-based online real estate juggernaut Zillow — which does not compete directly with Redfin’s brokerage business — is valued at $8.6 billion.
RELATED: Key question in Redfin IPO: Will it be valued as a tech company or a real estate brokerage?
Redfin’s business is growing, and the company gained market share in 81 of the 84 markets in which it operated. Even so, Redfin’s market share stands at just 0.58 percent nationwide. In its oldest markets, Redfin’s market share still hovers below two percent.
As the company notes in the IPO filing, “we’re just getting started.”
The IPO represents a new chapter for Redfin, which was initially founded under the name name Appliance Computing Inc. in 2002. Under the direction of CEO Glenn Kelman, a veteran of Plumtree Software, Redfin has morphed into a large real estate brokerage, with technology as one of its key underpinnings.
Redfin’s goal? Transform how people buy and sell homes in the U.S. in an industry that Kelman declared on 60 Minutes 10 years ago is the “most screwed up industry in America.”
Last year, Redfin brokers and affiliated real estate agents helped people in the U.S. buy and sell more than 75,000 homes, representing $35.3 million of Redfin’s $41.6 million in revenue.
Redfin is spending big as it continues to grow, taking losses along the way. It reported a loss of $28.1 million on revenue of $59.9 million for the first three months of 2017, according to the SEC filing. That’s compared to a net loss of $24.3 million on revenue of $41.6 million in the year-ago period.
The company, which sits atop the GeekWire 200 list of top privately held Pacific Northwest startups but will be removed following the public debut, has 2,427 employees, including 935 lead real estate agents, up from 752 in 2013. Redfin has raised nearly $170 million to date from investors like Madrona Venture Group, Greylock, Draper Fisher Jurvetson, Vulcan Capital, and Tiger Global. Each firm has around a 10-to-12 percent stake in Redfin.
Here’s a breakdown of the company’s top shareholders:
- James Slavet, Greylock Partners: 12.4 percent
- Paul Goodrich, Madrona Venture Group 11.4 percent
- Andrew Goldfarb, 4 percent
- Glenn Kelman, 3.7 percent
Redfin becomes one of the few tech-oriented companies to complete an IPO this year. Just 27 life sciences and tech companies completed IPOs in the first half of 2017, down substantially from 2014 and 2015, according to a report from Fenwick & West.
Key to Redfin’s success as a public company is the question of whether its primary function is as a real estate brokerage or a tech company. On one hand, Redfin uses technology everyday to make the real estate process easier, investing heavily in its mobile app, machine learning and other proprietary technology services. Redfin spent a whopping $34.5 million on technology last year, one third of its overall operating expenses.
On the other, its fortunes are still very much tied to the people-powered business of helping Americans buy and sell homes. What the market perceives Redfin to be will ultimately play a big role in its success as a public company, according to Robert Hahn, a management consultant at 7DS Associates who writes regularly about real estate and technology.
“If Redfin is a brokerage, making $256 million in revenues and losing tens of millions every year … it’s worth zip. Zilch. Zero. Nada,” writes Hahn. “If Redfin is a technology company that happens to make money from commissions … it’s worth $3 billion or so (or more!)”
You can read more about Redfin in this SEC filing, including many of the risk factors facing the company.
