Redfin Corp (NASDAQ: RDFN) rallied more than 70% in premarket today after Rocket Companies Inc (NYSE: RKT) agreed to buy the real estate listing platform for about $1.75 billion.
The all-stock deal values each share of Redfin at $12.50, which translates to a well over 100% premium on their previous close.
Rocket expects this transaction to close before the end of 2025.
Glenn Kelman – the current chief executive of Redfin will continue to lead the residential real estate brokerage under Rocket Companies.
The massive surge this morning has pushed Redfin stock to a new year-to-date high on Monday.
Why is Rocket Companies buying Redfin?
Rocket Companies expects the new joint entity to achieve over $200 million in run-rate synergies over the next two years.
Varun Krishna, its chief executive expects the merger to improve the overall experience of buying and selling residential property, thereby “reducing costs and increasing value for American homebuyers.”
In the press release, he also confirmed that the agreement will bring his company’s mortgage products to nearly 50 million users that visit Redfin on a monthly basis.
While RKT is paying an exciting premium to acquire Redfin, it’s still buying the real estate listing platform at a discount compared to its 52-week high of $14.45 a share in September of 2024.
Rocket announces a special cash dividend
On Monday, the financial technology company also confirmed plans of moderating Redfin’s organizational and capital structure following the acquisition.
In particular, Rocket wants to eliminate the firm’s “Up-C” corporate structure to streamline operations and integrate RDFN into its ecosystem.
To that end, RKT announced an 80 cents a share special cash dividend to be paid on April 3rd.
In the press release, Glenn Kelman, the chief executive of Redfin, said today:
Rocket and Redfin’s approaches to lending and brokerage services have always been two halves of one vision to make the whole home-buying process magical.
The use of artificial intelligence, he’s convinced, will make the overall process of buying and selling real estate that much better moving forward.
How Redfin did in its latest reported quarter
The news arrives only weeks after Redfin mixed results for its fourth financial quarter.
Redfin reported $244 million in revenue for its recently concluded quarter, which topped Street estimates of $241 million.
Still, the company lost a wider-than-expected 29 cents per share in its fiscal Q4.
For its current quarter, RDFN forecasts its revenue to fall between $214 million and $225 million. That also came in well below the consensus estimate of $244 million.
That’s why, heading into the Rocket news this morning, Wall Street rated Redfin shares at “hold” only.
Analysts had a mean price target of $7.26 on RDFN, however, that indicated potential upside of close to 30%.
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