Redfin (RDFN) is taking off like a rocket.
The tech-powered real estate company saw its shares roaring into the wild blue yonder on March 10 on news it was being acquired by Rocket Cos. (RKT) in an all-stock deal valued at $1.75 billion.
Redfin shares were soaring 65% to $9.62 at last check, while Rocket’s stock was sliding nearly 17% to $13.15.
“Rocket and Redfin have a unified vision of a better way to buy and sell homes,” Varun Krishna, Rocket Cos.’ chief executive, said in a statement.
Redfin shares are surging following the announcement..
Elijah Nouvelage/Bloomberg via Getty Images
Rocket Cos. CEO: Deal will improve home buying
“Together, we will improve the experience by connecting traditionally disparate steps of the search and financing process with leading technology that removes friction, reduces costs and increases value to American homebuyers,” he added.
Redfin, which was founded in 2004, operates a home-search platform with more than 1 million for-sale and rental listings and a tech-powered brokerage of more than 2,200 agents.
More Real Estate:
Buffett’s Berkshire sounds alarm on the 2025 housing marketDave Ramsey shares controversial take for Americans buying homes nowBillionaire Bill Ackman makes a shocking move in real estate
Fintech Rocket Cos. offers mortgage lending, real estate and personal-finance services.
The deal is expected to close in the second or third quarter, and Redfin CEO Glenn Kelman will continue to lead the business.
Investment firms reacted quickly to the news of the acquisition.
Rocket Cos.’ acquisition of Redfin has the potential to increase the pace of market-share gains for Rocket due to a wider funnel, UBS tells investors in a research note.
The investment firm, which sees long-term potential for the transaction, said the integration risk and timeline to accretion are likely to weigh on Rocket shares in the near term.
UBS has a neutral rating and $14 price target on Rocket shares.
Analyst cites $200 million in synergies
BTIG analyst Jake Fuller says Rocket’s takeover of Redfin relies on the ability to cross-sell financial products to homebuyers to justify “what on the surface” is an “aggressive price.”
The deal values Redfin at $12.50 a share, putting it above the $3 to $12 fair-value range that Fuller has articulated based on a range of underlying housing market assumptions.
Related: Analysts reboot Redfin stock price target after earnings
The analyst, who also has a neutral rating on Redfin, noted that Rocket has identified $200 million of synergies, including $60 million on the revenue side. That would bring the purchase multiple down to a “more amenable” nine times 2026 estimates for earnings before interest, taxes, depreciation and amortization.
Bank of America Securities analyst Mihir Bhatia said the firm views the deal as a continuation of Rocket’s strategy to move “up the funnel.”
The combined entity will provide customers with a seamless search-to-close experience, and Rocket believes this acquisition will help to drive purchase-mortgage growth, Bhatia added.
The firm also maintains a neutral rating on Rocket with a price target of $15.
Last month, Redfin missed Wall Street’s missed Wall Street’s fourth-quarter bottom-line expectations.
The company posted a loss of 29 cents a share, wider than the loss of 20 cents a share a year earlier and short of the consensus estimate for a loss of 23 cents a share.
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
