Rascoff SPAC to Take Offerpad Public at $3 Billion Valuation
Rascoff SPAC to Take Offerpad Public at $3 Billion Valuation
(Bloomberg) -- Offerpad, which helped pioneer a technology-driven method of selling homes, agreed to be acquired by Supernova Partners Acquisition Company Inc. in a deal that gives the startup a post-transaction value of $3 billion.
The transaction will add roughly $600 million to Offerpad’s balance sheet, helping the company keep up in a field where deep-pocketed competitors are wielding armies of data scientists and buckets of cash in a race to remake the U.S. housing market.
The agreement also unites Offerpad with Supernova Co-Chairman Spencer Rascoff, the former chief executive officer of Zillow Group Inc., whose old company was one of the startup’s main rivals. Another competitor, Opendoor Technologies Inc., went public last year through a merger with one of Chamath Palihapitiya’s special purpose acquisition companies.
“The real competition isn’t really Zillow or Opendoor, the real competition is trying to convince people to sell homes this new way,” Rascoff said in an interview. “Real estate, which is 10% of GDP, still has 99.5% of people sell their home the old way, which I think is a little absurd.”
Shares of Supernova spiked in early trading before paring the gains. The stock was down less than 1% at $10.60 as of 9:33 a.m. in New York.
Offerpad practices a high-tech version of home-flipping, sometimes called iBuying, that relies on pricing algorithms to make offers to potential home-sellers over the internet. When the seller accepts, Offerpad renovates the home and puts it back on the market, hoping to profit by charging sellers a fee for simplifying the notoriously complicated sale process.
IBuyers aim for smaller margins and larger scale than traditional flippers, requiring investments in everything from the real estate itself to repairmen and gallons of paint. While the firms are well known in a handful of geographic markets where they have invested most heavily, the model accounts for a tiny fraction of U.S. home sales, providing plenty of room to expand.
That has helped win favor with investors during a pandemic that boosted housing demand to rare heights, as low interest rates and cabin fever pushed Americans to upgrade their properties.
Shares in companies including Zillow and Redfin Corp. soared in 2020, while private companies that combine housing market transactions with technology have seized the moment to go public.
Offerpad was launched in 2015 by CEO Brian Bair, who previously founded a brokerage that helped institutional landlords like Invitation Homes Inc. acquire single-family rentals. The company has sold more than 14,000 homes since its inception, and currently operates in 16 geographic markets. It also employs licensed real estate agents to sell homes in a more traditional manner.
Supernova is led by co-chairmen Rascoff and Alexander Klabin, who co-founded Senator Investment Group. Robert Reid, who previously worked at Blackstone Group Inc., is CEO, and Michael Clifton, a Carlyle Group veteran, is chief financial officer.
Offerpad’s challenge is to expand into new markets and add to the services it offers, since selling title services and originating mortgages is likely to offer better profit margins than flipping homes. In some cities, Bair is planning to double the price limit on houses it targets to roughly $1 million.
Those efforts will be aided by the influx of cash from the merger, which includes a $200 million private investment in public equity, as well as $50 million in direct investment by affiliates of Supernova. Bair said that despite the new capital, the company will remain disciplined and not overpay for the homes it purchases.
“With iBuying, the easiest thing to do is to buy a home,” Bair said. “What we’ve been focused on is the way we acquire. If you overpay, you’re going to own the home for a long time.”
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