Redfin just got a $110 million shot in the arm from an influential backer, as the discount brokerage looks to ride out economic turmoil caused by coronavirus.
The Seattle-based brokerage said Monday that Durable Capital, a venture capital firm led by Henry Ellenbogen, will acquire a stake in the discount firm. The deal includes $70 million worth of common stock at $15.61 per share and $40 million of convertible preferred stock at $1,000 per share, according to a regulatory filing.
The deal will give Durable a roughly 4.9 percent stake in the firm, based on Redfin’s most recent proxy statement.
Ellenbogen, a star stock picker who spent 18 years at T. Rowe Price, launched Durable last year. In February, the firm raised $6 billion to invest in public and private companies.
At T. Rowe Price, Ellenbogen led the New Horizons Fund, which invested in Twitter and GrubHub. Under Ellenbogen, T. Rowe also invested in Redfin starting in 2013, CEO Glenn Kelman said in a statement. At the time, the brokerage was “a private company and the market was recovering from the great financial crisis.”
“In chaotic times, he understands our long-term commitments to our culture and our technology, and why those commitments position us to take share in a housing market that is being transformed by this pandemic to be more virtual, convenient and efficient,” Kelman said.
T. Rowe Price currently owns 12.3 million shares of Redfin common stock for a 13.5 percent stake in the brokerage, according to Redfin’s proxy statement. The Vanguard Group holds a 10.4 percent stake and Wellington Management holds a 6.7 percent stake. Redfin’s executive officers, including Kelman, and members of the board own a collective 8.2 percent.
Like other brokerages, Redfin’s stock has plunged in recent weeks as businesses in most U.S. cities closed because of the health emergency. Shares closed at $16.09 on Friday, compared to a 52-week price range from $9.63 to $32.77. Shares were trading at $15.71, down 2.36 percent, after the Durable deal was announced.
With most Americans at home during the pandemic, Redfin suspended its instant home-buying program this month. Last week, the firm said it would boost the base salary for its agents, as brokers across the country face a loss in income. Kelman won’t take a salary for the rest of the year, and members of the board will forgo cash payments for their work. All employees are giving up their cash bonuses for the rest of 2020.
In 2019, Redfin generated $780 million in revenue, up 60 percent year over year. Losses nearly doubled to $81 million from $42 million.