Goodbye Vector, hello public: Douglas Elliman makes NYSE debut
Investors can now buy brokerage without its tobacco-producing parent
UPDATED, Dec. 30, 11:15 a.m. — Douglas Elliman started trading on the New York Stock Exchange Thursday morning, marking its newfound position as a standalone public company.
The news comes nearly two months after the brokerage announced it would spin off from parent holding company Vector Group, which also owns tobacco company Liggett Group. Thanks to the split, wary investors can decide between buying into a cigarette manufacturer or the residential brokerage.
“This was a way to open up the market to a lot of investors by having the company separate. No one owns Vector for Douglas Elliman, they own Vector for the tobacco business,” said Howard Lorber, who will now serve as both the CEO of Vector Group and Douglas Elliman.
Now that the spinoff is complete, the brokerage trades under the symbol DOUG and was added to the S&P SmallCap 600.
Vector Group was trading at $17.16 per share when the market closed Dec. 29 before dropping to $12.99 per share upon opening Dec. 30. The price fell as holders of Vector common stock received a share of Douglas Elliman common stock for every two shares of Vector common stock they held.
The decision to give Elliman public legs of its own was a response to the ongoing housing boom spurred by low mortgage rates and high demand. The perfect storm gave Elliman a boost, with the brokerage reporting $354.2 million in revenue for the third quarter, up 70 percent from $208 million in the same period last year.
The brokerage’s net income was $25.1 million, compared to $11.8 million last year. Closed sales volume was $12.6 billion, a 62 percent increase from $7.8 billion a year ago.
The Elliman spinoff debuted with $200 million of net cash on its balance sheet and no debt, giving it a clean slate supported by strong revenue growth, healthy margins and limited capital expenditures.
Spinning off from an already public company like Vector places the new valuation in the hands of the marketplace, making Elliman’s entry different from a case like Compass, which raised money for a public debut.
“In the future if we need more money for expansion, we could go to the market and raise money,” Lorber said. “We are not selling any shares now.”
Vector shareholders will receive one share of DOUG for every two shares of the brokerage’s former parent company. Elliman has said it will have 10 million shares to offer as rewards to agents, employees, executives and acquisition targets starting next year, but details are unclear; such a program might not see the light of day until the second or third quarter of 2022.
After its shiny new public listing, Elliman will focus on expanding into new markets, and retaining and recruiting talent.
The brokerage has already expanded to California, Florida, Texas and other states, but the company is eyeing a growing list of luxury markets to tap into, including Arizona, Tennessee and Nevada.
“We’re basically a company that has grown in areas and in locations where we think our customers want to be,” Lorber said.
While Elliman may need to show investors some major forms of growth, the firm isn’t eager to scoop up other companies in a series of mergers and acquisitions the way Compass did.
“We’ve managed to expand without many acquisitions,” Lorber said. “We look and find the best way into the market. If it’s an acquisition, then we will, if not, we’re going to start from scratch.”
Elliman also plans to lean into proptech with its new venture, investing in early-stage solutions and companies to integrate into its business model. But that’s not the biggest thing the company wants to focus on, Lorber said, adding that the company would rather outsource the top companies rather than hire engineers to work on building systems in house.
Elliman isn’t interested in going the franchise route, Lorber said, referencing moves by other brokerages like Realogy and Berkshire Hathaway HomeServices. Instead of needing to demonstrate “explosive growth,” Lorber pointed to strong earnings and great management teams that would spur expansion in a short period of time.
Growing that footprint is also a way for the company to expand connectivity in markets it does not yet serve, said Douglas Elliman Realty CEO Scott Durkin. Referrals are a big part of the business and leaning into nationwide networks is important to the company’s expansion in its current markets, and beyond.
“Agents like to do business with other agents,” Durkin said. “We make sure our agents know about each other and know what their specialties are, and it gets them to these other markets.”