The housing market and economy haven’t done many companies any favors as of late, but they seem to have been especially hard on players in the iBuying sector. That appears to be the case for Offerpad, as the company aims to rally investors with a new reverse stock split on its Class A and Class B common stock.
The Arizona-based company implemented a 1-for-15 reverse split on June 12 to avoid delisting from the New York Stock Exchange. According to a company statement, the move automatically reclassifies every 15 shares of outstanding common stock into one new share.
“The reverse stock split is intended to, among other things, increase the per share trading price of the class A common stock to satisfy the price requirements for continued listing on the NYSE,” Offerpad said in a recent statement.
Offerpad was notified in November 2022 that it was non-compliant with the NYSE’s listed company regulations after its share prices dipped under the $1 threshold late last year. The notification gave the iBuyer roughly six months to regain compliance, which required Offerpad to boost and hold its share prices above the mark for over 30 consecutive trading days.
While there have been instances when the company’s share prices have made it above the dollar mark—specifically in January and February—Offerpad has struggled to maintain that level this year as market conditions influenced by the housing market shift have dealt their share of blows to the iBuying sector overall.
Positive as the move is supposed to be, it didn’t appear to be received well by investors, as Offerpad’s shares traded at $0.52 at the closing bell on Monday, June 12, down from $0.64 on the Friday before.
Shares opened at $7.80 on Thursday, June 15, under the new stock split dynamic, up slightly from Monday’s closing prices, now listed at $7.72 per share since the stock shift went into effect.
According to Offerpad, the stock split affects stockholders uniformly and won’t alter their percentage interest in the company’s equity except “to the extent that the reverse stock split results in some stockholders receiving cash in lieu of fractional shares.”
“No fractional shares will be issued in connection with the reverse stock split,” Offerpad said in a statement. “Instead, each stockholder will be entitled to receive a cash payment in lieu thereof at a price equal to the fraction of one share to which the stockholder would otherwise be entitled multiplied by the closing price per share of Class A Common Stock on the NYSE on June 12, 2023.”
Offerpad declined to elaborate further on its new reverse split stock when asked by RISMedia.
The company’s share price issues also overall challenges in the current market and economic environment, which company executives addressed during their first-quarter earnings call with investors.
Offerpad Founder and CEO Brian Bair pointed out during the call that the company has spent the past six months adjusting to the current market, which has been marred by elevated inflation and the Federal Reserve’s efforts to reel it in with interest rate hikes.
“With affordability challenges and many consumers choosing to stay in their current holder mortgage rates, general expectations are that transaction volumes in the broader real estate market will remain substantially lower this year compared to 2022,” he said.
Offerpad posted a 56% annual loss in revenue during the first quarter of the year compared to Q1 2022. While it halved its net losses compared to the same period last year, Offerpad still shed $59.1 million in the first three months of 2023.
Despite the company’s challenges, Bair and the company indicated that Offerpad is laser-focused on returning to peak performance.
“We thrived in the hot buyer’s market during 2021,” Bair said. “We adapted during the market shift in 2022, demonstrating our ability to perform under the current market conditions, with improving operational and financial results.”
Offerpad CFO Michael Burnett echoed similar sentiments while highlighting additional measures the company has taken to improve its performance throughout the remainder of the year.
“We accomplished our stated goal to sell or have under contract substantially all our homes purchased prior to the market shift,” he said. “This was critical to support continued improvement in our financial performance this year, and we accomplished this on schedule.”
