Future of Real Estate

110799

Success of RealPage and Zillow show some real estate IPOs have been great bets

A bunch of companies have gone public, only to be acquired a few years later

Innovation series by Steven Loeb
July 26, 2018
Short URL: http://vator.tv/n/4bda

Venture investing into the real estate space took a major upswing in 2017, with $12.6 billion invested, tripling the $4.2 billion from 2016. That was due to mega deals, including the $4.4 billion raised by WeWork from SoftBank, as well as a $550 million investment in Compass, the majority of which also came from SoftBank.

The space is so hot right now that there are multiple venture firms that are solely focused on real estate that just raised two: in June, JLL Spark raised a $100 million fund to invest in real estate technology, followed by Fifth Wall Ventures, which raised $100.8 million for its second fund, according to a filing with the Securities and Exchange Commission. The firm is targeting a total of $400 million for the fund. 

The true sign of a maturing space, though, is when companies start to go public, and we've already seen that start to happen with what some would call "real estate 2.0" companies, those that have come into existence in the last 10 to 15 years, such as Zillow and Redfin.

Real estate technology, however, has had a bit of a spotty history on the stock market. In the last 20 years there have been three high profile companies that went public, only to have their listings removed when they were repurchased. That includes Move.com, which went public in 1999, only to then be purchased by iPlace for $150 million in August 2001, and LoopNet, which went public in 2006 before being bought by CoStar for $860 million in 2011.

The most recent exampel was Trulia, which went public in 2012, before being bought by Zillow for a whopping $3.5 billion in 2014.

Interestingly, in two of those cases, the acquirer was another publicly traded real estate tech company. So it's not that these companies can't succeed on the public market, but more that only a handful have been able to. 

Here's the real estate tech companies that are still on the publicly traded markets are faring right now: 

  • IPO price: $15 (7/27/2017)
  • Price at the start of the year: $31.41
  • Current price: $25.37
  • Percentage change for the year: down 19.22 percent
  • Percentage change from IPO: Up 69.13 percent
  • Market cap: 2.11 billion
  • 2017 revenue: $370 million

 

Image result for zillow

  • IPO price: $20 (7/20/2011)
  • Price at the start of the year: $40.50
  • Current price: $62.69
  • Percentage change for the year: Up 54.7 percent
  • Percentage change from IPO: Up 213.5 percent
  • Market cap: 8.27 billion
  • 2017 revenue: $1.1 billion

 

Image result for costar

  • IPO price: $9 (7/1/1998)
  • Price at the start of the year: $298.29
  • Current price: $432
  • Percentage change for the year: Up 44.9
  • Percentage change from IPO: Up 4,700 percent
  • Market cap: 16.18 billion
  • 2017 revenue: $1.8 billion

 

Image result for realpage

  • IPO price: $11 (8/12/2010)
  • Price at the start of the year: $44.35
  • Current price: $59.15
  • Percentage change for the year: Up 33.4 percent
  • Percentage change from IPO: Up 437.7 percent
  • Market cap: 5.53 billion
  • 2017 revenue: $671 million

Who could be next?

So which companies could be the next ones to go public?

The most obvious answer to that question is Airbnb, which has been one of the most anticipated IPOs for years. The company, which has raised $4.4 billion, is valued at $31 billion. According to Pitchbook, if it were to IPO now, it would be the second largest of the last decade, assuming Uber doesn't go public first. 

The other obvious candidate for a public market debut is WeWork, which has raised even more money than Airbnb, with $8.6 billion, but with a smaller valuation of $20 billion.

There are two more real estate tech companies that could go public, though they are not quite as high profile as Airbnb and WeWork. The first is Compass, which has raised $808 million, including a $450 million round in December that valued it at $1.8 billion. The second is Opendoor, which has raised $645 million, most recently a $325 million round in June, giving it a $2 billion valuation.

(Image source: triplemint.com)


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