A double-digit percentage gain gave Smith Douglas Homes Corp. (SDHC) a Champagne moment in its debut today on the New York Stock Exchange. The profitable Georgia homebuilder’s stock ended at $24.00 – up $3.00 or up 14.29 percent from its $21.00 IPO price – in its first day of NYSE trading. Volume was about 4.04 million shares. That strong opening-day performance by Smith Douglas Homes – the first big IPO of the year – will help set the stage for more companies to go public in the weeks ahead.
The strength was there from the start. The stock opened at $23.50 – up $2.50 or up 11.9 percent from its $21.00 IPO price – late Thursday morning (Jan. 11, 2024) on the NYSE. By midday, Smith Douglas Homes Corp. was trading at $24.06 – up $3.06 or up 14.6 percent from its IPO price – on volume of about 1.84 million shares.
Smith Douglas Homes Corp. priced its IPO at $21.00 – the top of its $18.00-to-$21.00 range. The company sold 7.69 million shares at $21.00 to raise $161.49 million on Wednesday night, Jan. 10, 2024. The pricing at $21.00 gave Smith Douglas Homes Corp. a valuation – or a market cap – of $1.08 billion. The company kept the deal’s size in sync with the number of shares in the prospectus.
J.P. Morgan, BofA Securities, RBC Capital Markets, Wells Fargo Securities, Wolfe/ Nomura Alliance and Zelman Partners are the joint book-runners.
Smith Douglas Homes Corp. caters to first-time buyers and empty nesters in growing markets in the Southeastern U.S. – Atlanta, Raleigh, Charlotte, Birmingham, Huntsville, Houston and Nashville. The average sale price is $330,000, according to the prospectus.
The company, founded in 2008, is based in Woodstock, Georgia, about 30 miles north of Atlanta.
Follow the Sun Belt
IPO investors like the company’s profitability, its growth in the Southeastern Sun Belt, and the track record of its founder, Tom Bradbury, a homebuilder with more than 50 years of experience. Bradbury is the former CEO and founder of Colony Homes, which he sold to KB Homes (KBH) in 2003.
Smith Douglas Homes Corp. reported net income of $134.81 million on revenue of $770.1 million for the 12 months that ended Sept. 30, 2023.
“Nice numbers for an IPO,” a seasoned IPO investor said, when asked why he played the deal.
Smith Douglas Homes Corp. uses a “land-light” business model that involves buying “finished lots through lot-option contracts from third-party land developers or land bankers,” the prospectus says. This lot acquisition strategy “reduces our up-front capital requirements and generally provides for ‘just-in-time’ lot delivery, which closely aligns with our pace of home orders and home starts.” This is a key part of the company’s strategy to control expenses, according to the prospectus.
The company plans to spend $71 million of the IPO’s proceeds to repay debt under its existing credit facility as part of a refinancing, according to the prospectus.
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