A Dublin startup using AI to guide investments in Airbnb properties plans to sell shares to the public in a direct listing, skipping an IPO.
ReAlpha Tech Corp. would not raise any money if the listing is approved, according to a regulatory filing. However the company could do so if it issues new shares afterward.
If the U.S. Securities and Exchange Commission approves the registration, insiders and current shareholders of Central Ohio's newest public company – including the founders and Drive Capital LLC – could resell their own stock.
A direct listing saves on transaction costs, such as hiring an investment bank to go public, according to an SEC explainer. But it's a move usually made only by already very large consumer brands that have sufficient capital.
"Companies that choose this path are often ones that have strong brand recognition that can generate sufficient market interest," according to the SEC.
The share price is not yet determined, but 41.7 million of 42.5 million outstanding shares would be available if the SEC declares the listing effective and the holders wish to sell.
"(The company) will not receive any proceeds from the sale or distribution, as applicable, of shares of our common stock by the registered stockholders," ReAlpha said in the registration statement.
However, a Luxembourg-based alternative investment group has committed investing up to $100 million over three years if the company goes public.
Company officials declined to comment through a spokeswoman, citing the required "quiet period" while awaiting the SEC decision.
"We were founded on the belief that every person should have the access and the freedom to pursue wealth creation through real estate," said the prospectus in the registration statement. "We intend to leverage technology to democratize access to short-term rental investments."
Founder and CEO Giri Devanur owns 65% of ReAlpha, the filing said, so it would be considered a "controlled" company and exempt from certain regulations such as requirement for independent directors.
The company had recently valued itself at more than $400 million, according to regulatory filings in conjunction with recent transactions.
Those filings also disclosed the value – $13.1 million – in the nearly all-stock deal to acquire complementary Columbus real estate fintech Rhove in late March.
Columbus-based Drive, which was Rhove's largest shareholder, now owns just less than 2.5% of ReAlpha, according to the registration statement.
Dublin developer Brent Crawford, an early investor in ReAlpha's software, owns 5.6% of shares, the prospectus said.
Other investors in Rhove, the DBA of Roost Enterprises, that now own smaller stakes in ReAlpha include Columbus VC firm NCT Ventures, Cleveland-based JumpStart Inc., an affiliate owned by Columbus developer Brett Kaufman, and Columbus IT entrepreneur and philanthropist Dwight Smith.
All of them would be registered shareholders able to sell stock for liquidity if the listing is approved.
ReAlpha had previously reserved the Nasdaq ticker symbol RHOM, but the registration statement represents the ticker symbol as a solid circle.
ReAlpha's other moves
Also this month, ReAlpha named Jorge Aldecoa COO. CFO Michael Logozzo, still in that role, had been doing double duty as interim COO.
Aldecoa joined in September as president of subsidiary ReAlpha Homes. His 15 years in the real estate industry include managing a $1 billion portfolio as regional vice president for the southeast Florida region of Independent Homes. He also had been chief investment officer for Firm Capital American Realty Partners, and operations vice president for Transcendent Electra.
To prepare for the listing, the parent ReAlpha Tech merged into a subsidiary, ReAlpha Asset Management Inc., then renamed the whole company ReAlpha Tech. Asset Management already was registered with the SEC for a prior Regulation A campaign that raised $9.1 million.
Along with that simplification of its structure, the company filed a form listing the "market value of equity owned by parent company shareholders" as $400.5 million. The Rhove transaction days later also valued shares at $10 apiece, but that does not indicate what price would be set on the public markets.
ReAlpha has nine employees, the company said. Rhove founder Calvin Cooper joined as a consultant.
In other recent developments listed in the registration statement, the company:
- Extended the campaign until June for fractional investment in an Orlando-area Airbnb townhome. So far the offering for "Jasmine" has raised $314,000 of a minimum $379,000, with a minimum investment of $500.
- At the end of January allowed the expiration of a December joint venture with a Singapore-based investment firm that would have helped build up to a half-billion-dollar portfolio of Airbnb rentals. ReAlpha would have owned 51% of the properties, and Saiml Pte. Ltd. the other 49%.
- Instead, this month added Saiml CEO Balaji Swaminathan to ReAlpha's board of directors. He is not listed as owning shares on the prospectus.
- Reported that revenue for the nine months ended Jan. 31 was $97,000, down from $169,000 the same period last year. The company has been selling off Dallas-area properties first acquired when training its machine-learning software that identifies potential purchases, so for now is recognizing less rental income. Currently the company is focused on Florida for buying short-term rental properties.
ReAlpha is one of Columbus Inno's Startups to Watch for 2023.
Devanur, a serial entrepreneur who took his last company public, founded the company in late 2020 with a Texas real estate developer, who remains a director but left operations.
