Redwood Trust has priced a new stock offering that is aimed at increasing funding to new initiatives like investments in the single-family rental and multifamily sectors as well as routine business.
The company priced the public offering of more than $6.2 million common shares at $16.50 each, resulting in gross proceeds of more than $103 million. Underwriters have a 30-day option to purchase another 937,500 shares. Redwood expects the offering to close on July 26.
In addition to using the proceeds to fund further single-family rental and multifamily investments, Redwood plans to use the money raised to purchase residential mortgage-backed securities and loans as well as for other initiatives and general corporate purchases.
The company also may use part or all of the net proceeds from the offering to temporarily reduce borrowing on its residential mortgage warehouse lines and short-term real estate securities repurchase facilities.
Growth opportunities at Redwood include its expanded criteria jumbo home mortgage program and new investments like its recent acquisition of a minority interest in 5 Arches, a California lender focused on financing SFR, multifamily bridge and fix-and-flip properties, according to Compass Point Research & Trading.
Compass Point recently initiated coverage of the company, giving it a neutral rating and an $18 price target.
"We would become more constructive on shares of Redwood Trust if we see higher loan acquisition activity above the company's guidance of $7 billion to $8 billion for 2018 associated with sustained gross margins above guidance (75-100 basis points)," Compass Point analyst Vivek Agrawal said in a research note.
The company has been under new management this year, following the retirement of CEO Marty Hughes, who was succeeded by former president Chris Abate. The company last September hired former Wells Fargo Securities executive Dash Robinson as executive vice president, later promoting him to replace Abate as president.