Five Point Holdings hits the market with a +10% open
Five Point Holdings (NYSE: FPH) is a branch of Lennar Corp, one of the largest players in the US construction industry. The company held its debut issuance last week and you have to admit, it was a strong open.
Initially, the company had expected to sell off 21 million of its Class A common stock for about $18, $19, or $20 each. Five Point Holdings instead hit the NYSE at $14, below the expected range. Hours into the first day of trading, Five Point Holding’s shares were going for $15.40 per share, reaching an all-time high of $15.96 by closing of the first day of trading. Shares closed at +10% the initial pricing which is a good indication for the company.
So far Five Point Holdings has gotten a +14% returns from the IPO. The proceeds, totaling at an approximate $294 million, are expected to grow as the company offers an additional 3.15 million shares to insiders at the IPO price. Five Point Holdings will have a market capitalization of $3.35 billion if everything goes as planned. The compnies that advised the California-based real estate firm through its IPO included JP Morgan, Citi, RBC Capital Markets, Wells Fargo Securities, Deutsche Bank, Evercore ISI, Zelman Partners LLC as well as JMP Securities.
Five Point Holdings is based in Aliso Viejo, California. As the company headed into its initial offering, investors were worried about the company’s prospects after the issuance. The real estate market in the US is usually uncertain, but for some reason the climate pre-IPO was more unfavorable than usual. For one, house sales were on the decline. More and more people are into renting homes as opposed to buying them. This change in consumer preference is because mortgage rates have risen over the past few months. To cut out on the increased costs, people have now now resorted to renting homes instead of buying them. There was also the little problem of unavailability of land for expansion so building companies have had a hard time capitalizing on any growing demand for homes.
Five Point Holdings had an edge in the market that made it an attractive investment despite the poor market. One advantage was that it is based in California. California is one of the fastest-developing states in the US, therefore, there was no shortage of demand for homes. At least that’s what CEO Emile Haddad said. That seems true given that home sales in the coastal region have increased by 6.9% in the last two years. Haddad added that the new-age millennial buyer had a strong purchasing power that would ensure that most of the homes that Five Point Holdings made sold.
The CEO of Lennar Corp, which owns 40.2% interest in Five Point Holdings post-IPO, attributed the strong trading potential of FPH’s shares to the firm’s uniqueness and innovation. Apart from commercial homes, Five Point Holdings develops commercial spaces. Earlier this year the company got approval to further develop areas which had been closed to development before. These spaces are the San Francisco Shipyard and the Candlestick Point regions. Getting approval increased the company’s growth potential because demand for commercial places in California is one the rise as more tech companies build their headquarters there.