By Sri Hari N S
(Reuters) -Smith Douglas Homes notched a valuation of $1.21 billion in its market debut on Thursday, after the homebuilder’s shares jumped 11.9% on debut, marking a strong start to the year with investors warming up to new listings.
The company sold 7.69 million shares in its initial public offering (IPO), raising $161.49 million, priced at $21 apiece — the higher end of the previously estimated range.
Despite a turbulent economy and sky-high mortgage rates, Smith Douglas’ upbeat debut reflects investor confidence in the sector with housing demand still paddling strong.
The IPO market got a jolt of life in late 2023 with big names across sectors such as chip designer Arm Holdings, sandal maker Birkenstock and grocery delivery app Instacart listing their shares in the U.S.
No homebuilder has raised more $100 million in an IPO in the United States since 2021, according to data from Dealogic. The last to cross that was Dream Finders Homes, shares of which have since risen 153% above their offer price.
“The IPO proceeds should help Smith Douglas expand its presence in the Southeast region,” said Blake Brutocao, lead analyst at Renaissance Capital.
U.S. single-family homebuilding hit a 1-1/2-year high in November, positioning companies such as Smith Douglas for significant growth and investor interest.
Shares of homebuilding giants in the U.S. such as DR Horton, Lennar Corp and Pultegroup have surged more than 60% each last year.
“We could see more names from the real estate sector emerge as mortgage rates settle and additional buyers enter a market that has experienced low inventory,” Brutocao added.
Upon closing of the offering, founder fund, the Bradbury Family Trust will hold 88.2% voting power of the company.
Smith Douglas had previously disclosed that its home closing revenue dipped 4.3% for the quarter ended Sept. 30, 2023, while its profit fell 11.8%.
(Reporting by Sri Hari N S in Bengaluru; Editing by Shilpi Majumdar)
