Doma, once States Title, using SPAC to expand to appraisal, warranty

Title insurer Doma will use some of the proceeds from its special purpose acquisition company merger to move into the adjacent appraisal and home warranty businesses.

The company, until recently known as States Title, agreed to merge with Capitol Investment Corp. V, in a deal valued at $3 billion. This transaction will generate $645 million in proceeds, including $300 million from private investment in public equity.

PIPE investors include BlackRock, Fidelity Management & Research Company, Hedosophia, SB Management (a subsidiary of SoftBank Group), Wells Capital and The Gores Group. One of the latter’s SPACs formed a joint venture with United Wholesale Mortgage in the fall.

In addition, Lennar, which because of its sale of North American Title to States Title is now its largest shareholder, also is part of the PIPE, as is the former CEO of Zillow Group, Spencer Rascoff.

Through the merger, the company is seeking to enhance "the homeownership experience," said Doma CEO Max Simkoff during a conference call. "Use of the SPAC proceeds means we get to build upon the impressive growth strategy we have."

Other SPAC proceeds may be used to purchase additional title agency businesses, Simkoff said.

If the SPAC merger is completed, Doma would be the seventh publicly traded title insurance underwriter.

The four largest underwriters — Fidelity, First American, Old Republic and Stewart — are publicly traded, as is Investors Title. In addition, Radian Group entered the business with its acquisition of Entitle Direct, since rebranded to Radian Title Insurance.

Doma's customers include Homepoint (where it has 100% wallet share of its direct-to-consumer business), PennyMac and Chase, Simkoff said during the presentation.

At a time when industry economists are expecting a contraction in business, Doma projects that it will see a 53% increase in title order volume from 2020 to 2023, predicting a volume of 330,473 compared to 92,389 units last year.

Prior to the SPAC, Doma did seven funding rounds totaling nearly $380 million, according to Cruchbase. The most recent was a debt round of $150 million from HSCM Bermuda that was completed on Feb. 21. HSCM Bermuda was one of the new investors in the last equity raise of $123 million in a Series C round completed in May 2020 led by Greenspring Associates.

The team behind Capitol Investment V has completed four other SPAC transactions over the year, including Capitol I, which brought Two Harbors Investment public.

"There are very few industries more ripe for disruption than the title business," Mark Ein, Capitol's chairman and CEO, said during the call about the SPAC transaction.

Capitol Investment V started trading on Jan. 21, and closed on March 2 at $9.97 per share. The deal was announced after the market closed and the following morning it opened at $10.37 per share.

After the merger is completed, existing Doma shareholders will own 79.9% of the equity, with Capitol Investment V shareholders having 11.7% and the PIPE investors 8.5%.

Three mortgage business SPACs have been announced since last fall, with only United Wholesale Mortgage's deal having closed. The others involve Finance of America and SoFi.