Douglas Elliman goes public on the New York Stock Exchange

CEO of Vector Howard Lorber (iStock, Getty)

UPDATE, December 30, 11:15 a.m. – Douglas Elliman began trading on the New York Stock Exchange on Thursday morning, marking his new position as a self-sustaining public company.

The news comes nearly two months after the brokerage firm announced it would be parting ways with parent company Vector Group, which also owns tobacco company Liggett Group. With the split, cautious investors can choose between buying from a cigarette maker or residential brokerage.

“It was a way to open up the market to many investors by separating the company. No one owns Vector for Douglas Elliman, they own Vector for the tobacco industry, ”said Howard Lorber, who will now be both CEO of Vector Group and Douglas Elliman.

Now that the spin-off is complete, the brokerage is trading under the symbol DOUG and has been added to the S&P SmallCap 600.

Vector Group was trading at $ 17.16 per share when the market closed on December 29 before falling to $ 12.99 per share at the opening on December 30. The price fell as holders of Vector common stock received one Douglas Elliman common share. for two actions of the Vector common shares they held.

The decision to give Elliman its own public wings was a response to the ongoing housing boom spurred by low mortgage rates and strong demand. The Perfect Storm gave Elliman a boost, with the brokerage reporting third-quarter revenue of $ 354.2 million, up 70% from the same’s $ 208 million. 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, an increase of 62% from $ 7.8 billion a year ago.

Elliman’s spin-off debuted with $ 200 million in net cash on its balance sheet and no debt, giving it a clean slate supported by strong revenue growth, healthy margins and limited capital spending .

The split of an already publicly traded company like Vector puts the new valuation in the hands of the market, making Elliman’s entry different from a case like Compass, which raised funds for its public debut.

“In the future, if we need more money for expansion, we could go into the market and raise money,” Lorber said. “We are not selling any shares now.”

Vector shareholders will receive one share of DOUG for two shares of the brokerage’s former parent company. Elliman said he would 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 may not see the light of day until the second or third quarter of 2022.

Following its brand new public listing, Elliman will focus on expanding into new markets, as well as retaining and recruiting talent.

The brokerage has already expanded to California, Florida, Texas and other states, but the company is considering a growing list of luxury markets to tap into, including Arizona, Tennessee and Nevada. .

“We’re basically a company that has grown in regions and places where we think our customers want to be,” Lorber said.

While Elliman may need to show investors some major forms of growth, the company is unwilling to pick up other companies in a series of mergers and acquisitions the way Compass has done.

“We have been able to grow without a lot of acquisitions,” Lorber said. “We are looking and finding the best way to enter the market. If it is an acquisition, then we will do it, otherwise, we will start from scratch.

Elliman also plans to turn to proptech with his new business, investing in solutions and early stage businesses to integrate into his business model. But that’s not the most important thing the company wants to focus on, Lorber said, adding that the company would rather outsource the best companies than hire engineers to work on building systems. internally.

Elliman is not interested in going the franchise route, Lorber said, referring to moves from other brokerages like Realogy and Berkshire Hathaway HomeServices. Instead of needing to demonstrate “explosive growth,” Lorber pointed to strong earnings and excellent management teams that would drive expansion in a short period of time.

Scott Durkin

Douglas Elliman Realty CEO Scott Durkin

Growing that footprint is also a way for the company to expand connectivity in markets it does not yet serve, said Scott Durkin, CEO of Douglas Elliman Realty. Referrals are a big part of the business and relying on national networks is important for the company’s expansion into its current markets and beyond.

“Agents like to do business with other agents,” Durkin said. “We make sure our agents know each other and their specialties, and that brings them to those other markets. “

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