Government shutdown no problem for IPOsOctober 3, 2013: 9:56 AM ET
Re/Max CEO Margaret Kelly talks about the decision to go ahead with their IPO on day two of the federal government shutdown.
FORTUNE -- Wall Street may be getting jittery as Congress struggles to resolve the nation's budget problems, but investors betting on America's housing market don't seem fazed by Washington's dysfunction.
On the second day of the government shutdown, real estate brokerage Re/Max Holdings (RMAX) made its debut on the New York Stock Exchange. The Denver-based company had filed to go public in August. In its first day of trading Wednesday, shares popped, trading at $26.25 a share -- almost 20% above its initial offering price.
"We had been watching the timing," says Re/Max CEO Margaret Kelly about the weeks leading up to Tuesday when Congress couldn't agree on a spending bill to keep government offices and services running. "We knew our investors would like what we were offering and didn't think politics or the government shutdown would impact us. And it didn't. "
To be sure, the outcome would probably be far different if Re/Max waited later to go public. Washington is approaching another deadline that likely will have far bigger economic consequences than the government shutdown. If Congress fails raise the debt limit by Oct. 17, the federal government will be unable to pay its bills, and the U.S. will be in imminent risk of defaulting on its debt.
Nonetheless, Re/Max's timing to go public couldn't have been better; the company had the housing market on its side. Sales of previously owned homes rose 1.7% in August, the highest level in more than six years, the National Association of Realtors reported last month. Homes prices in 20 U.S. cities climbed 12.4% in the 12 months through July, the most in more than seven years, according to the latest S&P/Case-Shiller index released last month.
Other real estate companies have benefitted from the upswing. For its second quarter, Realogy (RLGY), which runs Century 21 and Coldwell Banker, reported its best performance since 2007. Online real estate listing company Zillow (Z) is also fresh off a strong quarter and recently announced a deal to buy StreetEasy.com.
Kelly says she expects the housing market to continue healing, even if the U.S. Federal Reserve moves to scale down its stimulus program. So long as interest rates rise gradually, she says higher mortgage rates won't stall the recovery.
"Look at mortgage rates -- they're at a 60-year low," Kelly says, adding that she and her husband paid a 14.5% mortgage rate when they bought their home in in 1982.
Re/Max closed at $27 a share in its first day of trading. The company was founded in 1973 and operates through a network of real estate agents and franchises. As of July 31, it had about 92,000 agents in 95 countries. Some of the money from its IPO is intended to reacquire regional real estate franchises in the Southwest and Mid-Atlantic U.S.
Re/Max reported $78.3 million in revenue for the six months ending on June 30, compared with $70.2 million a year earlier, according to the company's offering prospectus. It earned a profit of $15 million during the first half of this year, compared with $13.8 million a year earlier.