Trulia (TRLA) stock soared 41% Thursday from its IPO price, closing out the real estate company's trading debut at 24.
The San Francisco-based home listings and data firm initially hit the New York Stock Exchange at 9:38 a.m. ET, trading up 30% at 22.10. Shares rose in the morning, plateauing by mid-afternoon up about 44%.
Shares had priced at $17 late Wednesday, topping the company's expected range of $14 to $16 per share — on a day of positive housing news amid the nation's cautious home sales recovery.
"As we got closer to the pricing, it was obvious that there were going to be some minor pyrotechnics happening with the stock," said David Menlow, president of research firm IPOfinancial.com. "The market is clamoring for the right offerings.
Trulia sold 6 million shares, raising $102 million, more than the expected $75 million. Insider selling accounted for 1 million of the shares sold. Underwriters have an option to buy 900,000 more shares at the IPO price within 30 days.
"We are excited to welcome investors who have joined the next phase of Trulia's growth," Trulia co-founder and CEO Pete Flint said in a statement emailed to IBD. Trulia was founded in 2005 and has about 460 employees.
Trulia's blockbuster launch mimicked the first-day jump by its biggest rival, Zillow (NASDAQ:Z), a stock that's performed well since its July 2011 listing. Zillow priced at $20 and closed out its first day of trading up 79%. It since has continued to gain, closing Thursday at 46.17, up more than 1%.
Surely, Trulia benefited from Zillow's success, Menlow says.
"There's a certain amount of 'I can't believe I missed that stock' thinking on the account of IPO investors," he said.
Both Trulia and Zillow show house-hunters online maps of home listings, but are largely in the business of selling ads to real estate agents and brokers. The ads get placed next to the property listings, many of which are being sold by the same agents buying the ads.
Money From Middlemen Both businesses have seen sales skyrocket as homebuyers flock to mobile devices and desktops to research properties, although only Zillow's now finally reporting a profit.
Trulia's sales jumped 79% to $29 million in the six months ended June 30. But it reported a loss of $7.6 million in the first half of the year, widening the $2.6 million loss it reported a year earlier. Trulia's per-share loss in the first half of this year was $1.10, deeper than the 40-cent per-share loss it reported for the first half of 2011.
Almost every analyst research note on Zillow mentions Trulia, and not always as a strong competitor to Zillow. Trulia's "feedback was not as positive and subscribers were not happy with recent price increases," wrote Pacific Crest Securities analyst Chad Bartley in a Tuesday note. Bartley says that agents who used Trulia for their listings saw a "good" amount of traffic and "solid volume of leads, but varying conversion and ROI.
The similarities between the two businesses could lead investors to Trulia as its shares start to look "discounted" compared with Zillow's per-share value, says Francis Gaskins, of IPO Desktop. But similarities also could be a problem.
"One caveat is that probably anything new that Trulia does that's a success, Zillow can copy," he said. "But, I think, there's probably room in the market for two of them.
Zillow sued Trulia last week, alleging Trulia's home price estimates violated a patent held for Zillow's "Zestimate" estimates.
Still, "all the currents are flowing positively for Trulia," Gaskins said. "Currents" include the real estate market, which in August had a 7.8% seasonally adjusted rise in existing-home sales, reported Wednesday.
Still, investors aren't treating all real estate IPOs with the same enthusiasm. REIT Spirit Realty Capital (SRC) priced at $15 per share and opened its first trading day by dropping over 1% before closing flat.
Battle For Eyeballs As real estate rebounds, Trulia and Zillow will be fighting for more users. So far, Zillow's the leader.
Trulia says it had 22 million monthly unique users in the first half of the year, according to pre-IPO regulatory filings. Zillow said earlier this month that it has 33.5 million monthly unique users.
Independent figures collected by research firm ComScore show that Zillow has benefited from its advertising and home listing partnerships with Yahoo (YHOO).
In August, Trulia drew 13.1 million unique U.S. visitors, excluding mobile traffic, ComScore says. Zillow drew 24.1 million, but without Yahoo's traffic boost Zillow would have lured 16.6 million visitors.
Investors Thursday may have looked at Trulia saying "it didn't have as much growth as Zillow, so maybe they're the upstarts who will go out and grab a larger market share," Menlow said. "That's a very big incentive if they believe this market segment is in good shape."
