Builder’s Stock Price Falls after Raising $217.5M in Offering

William Lyon Homes, a builder that emerged from bankruptcy last year, fell in New York trading after raising $217.5 million in a public stock offering.

The shares dropped 9.5% to $26.87 at 9:39 a.m. Thursday. The Newport Beach, Calif.-based builder, which had traded over-the-counter, and an existing stockholder sold 8.7 million shares Wednesday for $25 apiece. The stock closed then at $3.60, ahead of a 1 for 8.25 reverse share split.

William Lyon joins at least two U.S. homebuilders that conducted public offerings this year as investors seek to capitalize on the housing-market recovery. New-home demand has risen as buyers, seeking to take advantage of low mortgage rates, find a tight supply of existing properties for sale.

“William Lyon is located in several markets that are growing swiftly,” Megan McGrath, an analyst with MKM Partners LLC in Stamford, Conn., wrote in a note yesterday before the pricing. “However, its locations combined with its long land supply in those areas—we estimate 16 years of supply in Arizona—creates longer-term risk, in our view, if sales pace in its chosen markets begins to ease.”

The company’s backers include Paulson & Co., the firm run by John Paulson, who earned $15 billion in 2007 betting against subprime mortgages; Luxor Capital Group LP, a New York-based investment manager; and Thomas Barrack Jr.’s Colony Capital LLC, which lent $206 million to William Lyon before its bankruptcy. Luxor offered about 2.2 million shares in the sale, aiming to trim its stake to 30% from 47%. Paulson’s stake was set to decrease to 11% from 14%, and Colony’s stake to 3.9% from 5%.

William Lyon had a net loss of $11.6 million on revenue of $372.8 million from Feb. 25, 2012, when it emerged from bankruptcy, to Dec. 31, according to a regulatory filing. The company sold 883 homes for an average price of $277,000 at communities in California, Arizona, Nevada and Colorado.

The stock sale was led by Credit Suisse Group AG and Citigroup Inc. The shares are listed on the New York Stock Exchange under the symbol WLH.

Tri Pointe Homes Inc., an Irvine, Calif.-based builder backed by Barry Sternlicht and co-founded by former William Lyon executives Doug Bauer, Thomas Mitchell and Michael Grubbs, raised $267.6 million in a January IPO, including the overallotment option.

Taylor Morrison Home Corp., based in Scottsdale, Ariz., and backed by Howard Marks’ Oaktree Capital Group LLC and David Bonderman’s TPG Capital, raised $722.9 million in an April IPO, including the overallotment option.