Foxtons made a stunning stock market debut today as investors betting on a booming London housing market sent the estate agent’s value soaring £140 million within minutes.
The agent — famed for its aggressive sales style and brightly coloured Minis — was already priced at the 230p top end of the range for its heavily oversubscribed offering, valuing the company at £649 million. But the City instantly waded into the stock, sending shares up more than 20%, or 48.75p, to 278.75p — pushing the market cap close to £790 million. More than 50 million shares changed hands in the first hour of trading, dealers said.
Management, including chief executive Michael Brown, were set to make fortunes cashing out part of their 20% stake in the business valued at around £160 million following today’s surge.
IG’s Chris Beauchamp said: “I can’t remember the last time I saw shares in a major company move so much on the first day of trading. Movements of 5% or 6% are common but this is something else.” ETX Capital’s head of trading, Joe Rundle, also reported high levels of demand as clients “expressed their general bullishness over the UK housing market recovery”.
The agent, founded by Jon Hunt,pictured, in 1981, has 42 branches, all but two of which are in London — where prices have risen almost 10% in the past year. Foxtons said in float documents it had identified “at least 60 additional local markets” and plans to open up to 10 branches a year between 2014 and 2018. Between January 2011 and December 2012, Foxtons sold one in every three homes sold in the City, one in four in Ladbroke Grove and one in every five flats sold in Chelsea.
But the wider market outside London is also showing recovery signs as a host of government support schemes boost the property market, including the Bank of England’s Funding for Lending scheme and the Government’s Help to Buy budget initiative.
The float also represents a belated success for private equity firm BC Partners, which bought the company from Hunt at the peak of the housing market in 2007 for £360 million, but business plunged in the wake of the credit crunch. BC Partners ceded control in 2010, before taking majority ownership again last year with a £50 million cash injection, and it is understood that the company has doubled its investment in the business.
Foxtons is the second major estate agent to float this year, after Countrywide — whose agencies include London’s Hamptons and upmarket Sotheby’s — returned to public markets after a six-year absence. Countrywide’s shares are up more than 60% since its March float. Panmure Gordon’s Keith Baird said: “Countrywide is more diversified but Foxtons is a London player. London has become a banker for a lot of international money. For them it is like buying a gold bar.”
Brown said: “We welcome our new shareholders to Foxtons and we are looking forward to the next stage in the development of the business as a listed company.”