Redfin Corp. (NASDAQ: RDFN), a real estate listing platform, rallied by more than 70% today in premarket after Rocket Companies Inc. (NYSE: RKT), agreed to purchase the platform for approximately $1.75 billion.
The all-stock transaction values each share of Redfin as $12.50. This is a premium of over 100% on their previous closing price.
Rocket expects the transaction to close by the end of 2025.
Glenn Kelman, the current Chief Executive Officer of Redfin, will continue to lead Rocket Companies’ residential real estate brokerage.
Redfin’s stock reached a new high for the year on Monday, thanks to the massive surge in this morning.
Why did Rocket Companies buy Redfin?
Rocket Companies expects that the new joint entity will achieve run-rate synergies of over $200 million over the next two year.
Varun Krishna, the chief executive of the company, expects that the merger will improve the overall experience for buying and selling residential properties, “reducing costs and increasing the value for American homebuyers.”
In the press release he confirmed that the agreement would bring his company’s products to the nearly 50 million Redfin users who visit the site on a monthly base.
RKT paid a premium for Redfin but it is still buying the real-estate listing platform at a discounted price compared to its 52 week high of $14.45 per share in September 2024.
Rocket announces special cash dividend
The financial technology company confirmed on Monday that it will also be modifying Redfin’s capital structure and organizational structure after the acquisition.
Rocket is particularly interested in eliminating the “Up-C’ corporate structure of the firm to streamline operations and to integrate RDFN into their ecosystem.
RKT has announced a special cash dividend of 80 cents per share to be paid out on April 3 .
Glenn Kelman, chief executive officer of Redfin said today in a press release:
Rocket and Redfin have always had a shared vision of making the home-buying experience magical.
He’s convinced that artificial intelligence will improve the process of buying and renting real estate.
How Redfin performed in its most recent reported quarter
The news comes just weeks after Redfin’s mixed results for its fourth quarter financial results.
Redfin’s recent quarter revenue was $244 million, exceeding Street estimates of $241 millions.
The company still lost more than expected, 29 cents per share, in its fourth fiscal quarter.
RDFN expects its revenue for the current quarter to range between $214 and $225 millions. This was also well below the consensus estimate, which was $244 million.
Wall Street has only rated Redfin’s shares as “hold” in the morning Rocket news.
Analysts had a median price target of $7.26 for RDFN. This indicated a potential upside of nearly 30%.
This post What caused Redfin stock to soar 70% on Sunday? This post may be updated as new information unfolds.
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