Many MLS organizations, brokers and Realtors are a lot richer with the debut of HomeStore (NASDAQ: HOMS) on the NASDAQ. But another opportunity exists to strike gold twice. The debut of HomeSeekers on the NASDAQ could be the best thing that's happened to Realtors since HOMS debuted.
HomeSeekers (NASDAQ: HMSK), an OTC stock, has just made its debut on the NASDAQ and already the listings aggregator is increasing in value. First it jumped 32% with the announcement that trading would commence on Thursday, Sept. 16th. Hurricane Floyd, slowed things down with only 1/4 the usual traders on the floor, but the stock quickly spiked over 20% on Friday, closing at over 18%. Yesterday, the stock hovered between 13 13/16 and 14 3/4 as the day traders played with it. It closed at 14 1/2. HMSK has effectively doubled its market value in less than two weeks.
Does that do anything to quicken the pulse of HOMS stockholders? It should. HomeSeekers is going at growth a little differently than HomeStore, but they are using parallel paths to get there - Realtors' listings to gain market strength and services to Realtors to provide revenue. In essence, Realtors have the opportunity to build HomeSeekers and create another Realtor.com - without hurting HomeStore's stock values and without the restrictions and liabilities imposed by the NAR. If it worked once with Realtor.com, it is possible that it can work twice with a second Realtor-friendly company. But first, HomeSeekers has a few problems to overcome.
Before it can make Realtors and other investors rich a second time, HomeSeekers has a major problem - lack of traffic comparable to Realtor.com.
Realtor.com gets an estimated four times the visitors that HomeSeekers' does. While Realtor.com could not be reached for an affirmation of its traffic, HomeSeekers maintains that its receives, on a good day, 34,000 visitors. What drives traffic to a real estate site? Listings. Listings are the number one reason home buyers go online. As long as a site can offer comprehensive listings, it will be assured of traffic. But HomeSeekers must be able to compete with HomeStore in order to get viewers, not to mention a fair stock valuation.
Second, the site is still viewed by some industry personnel as an outsider. Without the endorsement of the NAR, there is no guarantee that any listings aggregator has the interests of the Realtor at heart. This is a philosophy that enabled Realtor.com to get a leg up on listings through its Gold Alliance program. Perception is reality, but the reality is that HomeSeekers has historically proven to be as Realtor-friendly if not more so than Realtor.com.
The Currency of Listings
Considering how many battles took place over listings, they must be more valuable than gold. Realtor.com's Gold Alliance agreement captured exclusive listings that close the door in the face of HomeSeekers, HomeAdvisor and others. HomeSeekers countered with free stock warrants to any MLS and broker who shares their listings. The strategy has paid off but only modestly for HomeSeekers. Consider the following: HMSK has one fifth of the shares outstanding compared to HOMS. HOMS has roughly a $3.5 BILLION market cap vs. under $200 million for HMSK. The number of listings are not that far apart (1.3 mil vs. 800K). If you divide a $3.5 billion market evaluation by 1.3 million listings you get approximately $2,692 per listing. Using same number for HMSK would imply a stock price of $154! Can you spell undervalued? If listings are so valuable, why wouldn't they be worth so little on HMSK and so much on HOMS? Clearly, the stock market doesn't get it, but it could catch on anytime. And those holding HMSK stock could be all the wealthier for it.
Granted, this is flawed reasoning, because HomeStore has many other sources of revenue generators besides Realtor listings. The point is they got there because of Realtor listings. It was largely on the marquee name value of the National Association of REALTORS® that HomeStore was able to achieve its position as the listings leader, giving more visitors a reason to go to Realtor.com than any other listings provider. Why couldn't Realtors do the same with HomeSeekers?
Loyalty Shouldn't Be An Issue
Why wouldn't Realtors be just as supportive of another company who is using their listings to generate traffic and revenue? Like Realtors feel about HomeStore, stock deals are like a blood oath - an assurance that the company will work to protect its relationships. But, HomeSeekers has also proven its loyalty to Realtors.
In addition to offering stock warrants (which were introduced at $7 a share) for listings to brokers (as well as MLS organizations) HomeSeekers has also provided numerous free programs for Realtors which include free Web pages, free links to their listings, and a service called Internet in a Box, which enables new agents to get a point and click jump on marketing on the Internet. There is also a program to enable brokers and agents to post their listings directly to the Internet, a benefit for those with outmoded MLS information systems, or for those brokers who don't believe in exclusive listing agreements with national services. In addition, the site does not promote FSBO listings next to Realtor inventory even though it would be well within its rights to do so. If these actions don't prove Realtor-friendliness, it would be hard to imagine which ones would.
HomeSeekers Could Be Poised for Growth
There are three main reasons why HMSK being traded on NASDAQ is a good thing. Some institutional investors can now purchase the stock which were prohibited from doing so on the OTC. Second, the stock is more attractive to mutual funds who are interested in undervalued small cap stocks. Third, the stock is more liquid - information on the NASDAQ is more up to date and easier to obtain.
Although Realtors aren't being offered stock options as they were with HOMS, HMSK's stock is still undervalued by comparison, despite its 50% rise in value. The current price of just under $15 is still less than Realtors were offered for a limit of 100 shares for the initial pricing of HOMS. The opportunity for growth is even greater - a second chance to strike gold. But these are only advantages for Realtors who believe enough in these companies to buy stock. Again, what's the point of sharing listings and not becoming a shareholder?
Competition is Good for Everyone
There's no better insurance than buying stock in a competitor. What is the advantage for HOMS stockholders? The value of competition. HMSK's rising stock values helps to validate HOMS valuations. Competition means that both stocks will be valued more highly by investors. Just look at IPIX and Bamboo.com, whose stocks have risen neck and neck since both debuted last month.
HomeStore's debut brought a lot of positive attention to the online real estate industry but it is going to take revenue generation to keep it going. Realtor.com can't keep returning to the same well - the Realtor - to grow. That's why competition between HOMS and HMSK will be a good thing for Realtors, especially if they own stock in both companies.
