The Daily Ten – Airbnb doubles in IPO debut, Compass the bane of real estate, the greatest year for mortgage originators…
The Daily Ten
1. Airbnb stock price more than doubles in blockbuster IPO | New York Post
Airbnb’s stock price more than doubled Thursday in a blockbuster market debut that capped the vacation-rental giant’s comeback from the coronavirus crisis.
Airbnb’s shares started trading on the Nasdaq at $146 apiece and soared as high as $165, marking a roughly 143 percent surge from the listing price of $68.
The San Francisco-based company was recently trading at a market value of more than $109 billion — more than twice the roughly $47 billion valuation that was anticipated after it raised $3.5 billion from the IPO.
Airbnb CEO Brian Chesky was speechless Thursday morning when a TV interviewer told him the firm’s share price was poised to more than double.
“I’m very humbled by it,” Chesky said on Bloomberg Television. “Today is a very special day for everyone, but the higher the stock price, the higher [the] expectations, the harder we’re going to be working, obviously.”
2. Mortgage Originations Are on Pace for Best Year Ever | WSJ
Record-low interest rates and strong demand for homes boost lenders during Covid-19 pandemic
Americans are poised to take more mortgages this year than they did even during the run-up to the 2008-09 financial crisis.
In the first nine months of the year, lenders extended $2.8 trillion of mortgages, according to industry-research firm Inside Mortgage Finance. The boom has extended into the final quarter of 2020, prompting analysts to predict origination volume will exceed the prior record of $3.7 trillion in 2003.
The home-lending surge is an unexpected reverberation of the Covid-19 recession. The pandemic has put millions of people out of work and made it tougher to show homes to prospective buyers. But it has also ushered in record-low interest rates that prompted millions to refinance and lower their monthly payments or trim the length of their loans.
“2003 was a record that nobody thought would ever be achieved again,” said Guy Cecala, chief executive of Inside Mortgage Finance. That year low 30-year mortgage rates led to a surge in refinancings.
3. How Compass Became the Bane of Real Estate | Marker
The high-tech real estate startup boasts SoftBank backing, a $1.6 billion war chest, and plenty of skeptics. Now it’s cashing in on the pandemic real estate boom.
“None of us knows how long this crisis will last,” pleaded Robert Reffkin in a letter to Nancy Pelosi and her Republican counterpart Kevin McCarthy in March. Reffkin, CEO of real estate startup Compass, was urging Congress to include independent contractors like real estate agents — some 2 million of them in the United States, according to the National Association of Realtors — in its economic stimulus package. In his plea, Reffkin cleared up any misconceptions about the professionals: They were entrepreneurs and small business owners who represent the backbone of the U.S. economy, personify the American dream, yet typically only earn less than $41,800 per year. “We do know that for real estate agents, the economic pain will last even longer than it will for those in many other professions.”
The heartfelt missive on the plight of his industry during a pandemic — he even mentioned his mother, who works as an agent for his firm — came during a particularly bleak moment for Compass and its more than 11,500 independent contractor agents who depend on it. With the backing of $1.6 billion in venture capital, including a $450 million infusion from SoftBank in December 2017, Compass had been on a growth streak, grabbing market share in the nation’s most expensive housing markets and becoming a major player in high-end residential real estate. But as everything, including real estate sales, ground to a halt in late March, it left a commission-dependent workforce desperate for signs of life.
4. These Airbnb hosts earned more than $15,000 on Thursday after the company let them buy IPO shares | CNBC
Since starting as an Airbnb host in 2016, Travis Schurr has become a mainstay on the site, listing more than 20 houses in the Las Vegas area. He began when one of the properties in his home-flipping company didn’t sell, so he turned it into a short-term rental.
Now, Schurr and his wife, Janie, are among Airbnb hosts making money from a huge first-day pop in the company’s IPO. In its public debut this week, Airbnb set aside up to 3.5 million non-voting shares for hosts, accounting for as much as 7% of the total offering.
Schurr, 45, said he’s never been able to buy into an IPO before and called the decision a “no-brainer” given what he knows about how they typically perform. He gladly bought 200 shares, the maximum available to him, for $68 apiece, expecting a significant pop when trading started on Thursday.
5. Barclays Rethinks Real Estate Needs in Cost-Cutting Push | Bloomberg
Barclays Plc is looking to reduce its real estate expenses in the U.K., U.S. and India as the shift to remote working adds fuel to its cost-cutting ambitions.
The bank could announce changes early next year although the board has not taken a final decision on the extent and timing of any measures, people with knowledge of the matter said. Further reducing branches in the U.K., which was already being examined before the pandemic, is one option under scrutiny, the people said, asking not to be named discussing private information.
A spokesman at Barclays declined to comment.
Finance Director Tushar Morzaria has given investors some details of Barclays’ plans, saying in late October “we probably have more real estate in London than I think we would ideally like, and I’m talking about head office or large buildings.”
“Depending again on how the pandemic goes and how working behavior goes, we may have too much in Manhattan as well,” he said. His comments have not been previously reported.
6. Residential renewable energy developer Swell is raising $450 million for distributed power projects in three states | TechCrunch
Swell Energy, an installer and manager of residential renewable energy, energy efficiency and storage technologies, is raising $450 million to finance the construction of four virtual power plants representing a massive amount of energy storage capacity paired with solar power generation.
It’s a sign of the distributed nature of renewable energy development and a transition from large-scale power generation projects feeding into utility grids at their edge to smaller, point solutions distributed at the actual points of consumption.
The project will pair 200 megawatt hours of distributed energy storage with 100 megawatts of solar photovoltaic capacity, the company said.
Los Angeles-based Swell was commissioned by utilities across three states to establish the dispatchable energy storage capacity, which will be made available through the construction and aggregation of approximately 14,000 solar energy generation and storage systems. The goal is to make local grids more efficient.
7. JP Morgan warns investors that Tesla stock is ‘dramatically’ overvalued in new report | Fortune
To add or not to add, that is the question.
As investors anticipate Tesla’s December 21 addition to the S&P 500, investors who benchmark their performance against the index have a tough decision to make. As JP Morgan analysts wrote this week: “We have recently fielded a number of calls from long-only investors who are faced with or shortly will be faced with the decision of whether or not to buy Tesla shares.”
The bank’s answer?
“We recommend investors not weight Tesla shares in their portfolio in equal proportion to the S&P because Tesla shares are in our view and by virtually every conventional metric not only overvalued, but dramatically so.”
Tesla shares closed at $627 on Thursday. As the analysts led by Ryan Brinkman wrote, investors should “consider that in the two years since December 8, 2018 during which TSLA shares have risen +808% and during which analysts have on average increased their 12 month price targets by +451%, analysts have simultaneously lowered their estimates for Tesla EPS for 2020, 2021, 2022, 2023, and 2024.”
8. U.S. home prices march upward | Axios
Middle-income housing across America — particularly in big coastal cities — is growing scarcer than ever, as the wealthy bid up properties that might once have been considered “affordable.”
Why it matters: The pandemic’s effects on the housing market may turn out to be permanent — and could widen the gap between rich and poor. Renters and buyers alike face rising prices that outstrip income growth and favor people with cash savings.
Driving the news: The median price of a single family home in California crossed the $700,000 mark this summer — a record — setting a new standard for what the American Dream might cost.
Housing experts say it’s a trend that’s accelerated over the last five months and tied directly to the pandemic: Low interest rates — which the Fed seems inclined to keep, thanks to coronavirus — are lulling people into the market at a time when everyone’s craving more space to live and work.
9. The Wealthy Are Jumping Into Bitcoin as Stigma Around Crypto Fades | Bloomberg
With Bitcoin surging more than 270% since March, the rich are ratcheting up investments in digital currencies and anticipating further gains.
Christian Armbruester wishes he’d bought more.
Armbruester, the founder of Blu Family Office, a London-based investment firm for wealthy clients, dabbled in cryptocurrencies a few years ago. But the onetime investment banker, whose family made a fortune in metals and manufacturing, believes cryptocurrencies have earned a place in a diversified portfolio. With Bitcoin surging more than 270% since its 12-month low in March, he’s ratcheting up his investments in the space and eyeing big gains.
“We’re now looking for trading opportunities in a very exciting field,” said Armbruester, who manages about $670 million for Blu Family Office, including his personal wealth.
Armbruester has plenty of company. Mexican media billionaire Ricardo Salinas Pliego recently tweeted that he’s invested 10% of his liquid assets in Bitcoin. Wall Street legends Stanley Druckenmiller, Paul Tudor Jones, and Bill Miller have endorsed buying it. After influential money manager Rick Rieder went on CNBC last month and said Bitcoin “is here to stay,” more than 874,000 viewers watched the clip on Twitter, attracting far more hits than his segments on Covid-19 or monetary policy.
10. PropTech lender raises £7.5m to meet house-buying boom | BusinessCloud
London PropTech lender Proportunity has raised £7.5m funding to meet growing demand for its deposit borrowing product.
The start-up offers home buyers an equity loan of up to £90,000 to be used as a 5% cash deposit, bolstering buying power.
The debt capital injection of up to £7.5m will be used to meet record demand following a post-lockdown housing boom.
The company has also hired Marita Cavalcanti, previously of OakNorth, as its CFO. Cavalcanti will lead the expansion of their debt capital by drawing in more institutional money towards Proportunity’s lending fund.
The firm, one of Tech Nation’s 2020 FinTech cohort, reports it onboarded over 200 new intermediaries during the previous quarter.
Vadim Toader, chief executive and co-founder of Proportunity, said: “When the pandemic hit, we were able to leverage our property market technology to quickly adapt lending decisions, increasing our portfolio’s resilience and continuing to issue loans, where others lenders were forced to pull back mortgage products or put lending on hold entirely.