Posted on: Friday, November 12, 2004
ZipRealty's stock offer a hit with investors
By Annette Haddad
Los Angeles Times
ZipRealty Inc., a real estate brokerage that uses the Internet to facilitate home sales, received a warm reception from investors when it hit the market with initial public stock offering this week.
Shares of the Emeryville Calif.-based company gained about 25 percent Wednesday during the company's first day of trading. The initial price of the company's 4.55 million shares of stock was $13. Traded on the Nasdaq Stock Market under the symbol ZIPR, the stock finished the day at $16.30, after rising to a high of $17.50. Its market value stood at $311 million.
The company has been around only since 1999. When they filed their registration papers for the IPO, executives noted that their business model was "relatively unproven." They cited other risk factors too, including the possibility that rising interest rates could lead to a downturn in home sales and a plan by the National Association of Realtors to restrict property listings on the Internet. But ZipRealty sees promise, and is betting investors will, in the way that people are looking for homes these days: More than 70 percent use the Internet at some point in their search. Industry experts agree that it's only a matter of time before other aspects of the home-buying and selling process move online.
"Generation Xers especially don't want to deal with agents until all their homework is done," said Steve Murray, an industry consultant and editor of the newsletter Real Trends. "And they are increasingly price sensitive."
ZipRealty executives, Murray said, figured that out early on. "The company has gotten to where it is simply because it beat everybody else online."
Buyers and sellers hook up with ZipRealty by registering on its Web site. They then get direct access to the vaunted Multiple Listing Service, or MLS, the primary stock in trade of real estate agents.
The company does other things differently. It offers cash rebates to buyers — the money is taken out of ZipRealty's commission — and gives sellers discounts of up to a quarter of the traditional 6 percent agents' fee. And ZipRealty agents are full-time employees who work for commission and get benefits; most traditional real estate agents are independent contractors.
Company executives see their Internet-based model doing for real estate transactions what companies like Expedia Inc. and ETrade Financial Corp. did for travel and stock trading: Make the process more efficient and less costly.
Online real estate merchants account for only a tiny fraction of the $1.3 trillion in residential properties sold annually in the U.S.
