"The real estate conglomerate saw its stock price rise from $7 at close of market on Friday to over $11 at 9:30 Monday morning. As of midday Tuesday, Anywhere's stock was trading for roughly $10.31 per share. In contrast, Compass's stock fell from $9.40 at close of market on Friday to a low of $7.76 late morning on Tuesday. According to experts, the drop in Compass's stock price is primarily due to it assuming roughly $2.6 billion in debt as part of the acquisition."
"Although the drop in stock price is not good news for investors, Ryan Tomasello, the managing director of Keefe, Bruyette, and Woods (KBW), sees reasons to be excited about this all-stock deal. I think Anywhere's willingness to accept consideration in the form of 100% stock is a vote of confidence in the belief that this will be a successful deal for Compass and allow them to drive attractive returns in their share price, based on various components of their strategy, Tomasello said."
"While the future of the housing market still remains uncertain, analysts agree that the deal gives Compass a lot of leverage, which may enable it to create more favorable conditions as it looks to offset some of the debt it has acquired. Wall Street investors see plenty to like in Compass's all-stock acquisition of Anywhere Real Estate. As Steve Murray, senior advisor to HousingWire and founder of real estate consulting firm RTC Consulting, explained, the math tells the story."
Anywhere's stock jumped from $7 at Friday's close to over $11 by 9:30 Monday, trading around $10.31 midday Tuesday. Compass's stock declined from $9.40 to a low of $7.76 after assuming roughly $2.6 billion in acquisition-related debt. The all-stock structure gives Compass leverage to create conditions to offset debt and pursue attractive returns. Forecasted cash-flow comparisons show Anywhere trading at about 3.2 times projected 2025 cash flow, below peers such as RE/MAX at six, implying relative valuation headroom for investors if cash flows materialize. Wall Street investors view the deal positively given the valuation gap.
Read at www.housingwire.com
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