The sales proceeds of $15 million will strengthen the company’s financial position and support growth initiatives, Fathom Realty parent company said Monday of its latest move to shore up finances.
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Fathom Realty’s parent company has sold its insurance subsidiary, Dagley Insurance, back to founder Nathan Dagley and will use the $15 million in proceeds to strengthen the company’s financial position and support growth initiatives.
“Dagley Insurance will continue to work closely in support of the Fathom Realty agent network across the 47 states in which it operates, providing their real estate clients with a range of high-quality service offerings,” Fathom Holdings said in announcing the deal after hours Monday. “Fathom Realty’s agents will not experience any change in how they currently work with Dagley Insurance.”
Shares in Fathom Holdings, which in the last year have traded for as little as $1.40 and as much as $8.20, were up 7 percent in after hours trading from Monday’s closing price of $1.52.
Fathom acquired Dagley Insurance in 2021 when it bought parent company E4:9 Holdings and two other subsidiaries, Encompass Lending Group and Real Results. The $28.88 million deal furthered Fathom’s goal of building an end-to-end real estate services platform integrating residential brokerage, mortgage, title and insurance after going public in 2020.
When Fathom acquired it, Dagley Insurance was licensed in 47 states and employed 57, generating about 15 percent of E4:9’s revenue, the company said at the time. Dagley paid Fathom $8 million at closing to regain ownership of the company he founded, with another $7 million in payments to be spread out over the next 24 months.
Nathan Dagley
“I would like to express my gratitude to Marco Fregenal, Fathom founder Josh Harley, and Fathom Realty Chief Operating Officer Samantha Giuggio for their support over the past three years,” Dagley said in a statement. “My tenure at Fathom has not only fostered numerous valuable relationships but has also significantly contributed to the growth of Dagley Insurance.”
Like many companies in the real estate brokerage and mortgage lending business, Fathom has seen revenue shrink as elevated mortgage rates dented transaction volume.
But the Cary, North Carolina-based flat fee brokerage has continued to grow its agent network, finishing 2023 with 11,795 agents, up 14 percent for the year.
Fathom’s 15 percent decline in 2023 transaction volume, to 38,139, was less than the industry average of 19 percent. But the company reported an $8.4 million fourth quarter and $24 million 2023 net loss in March, with revenue down 16.4 percent from a year ago, to $345.2 million.
Fathom CEO Marco Fregenal, who took over for founder Josh Harley when he stepped down for family reasons last fall, said the sale of Dagley Insurance gives the company a cushion to negotiate bumps in the road.
Marco Fregenal
“This strategic decision strengthens our balance sheet while advancing our agent growth strategy,” Fregenal said in a statement. “The infusion of capital resulting from this transaction provides us with essential capital to confidently navigate any potential future headwind and positions us to generate increased value for our shareholders through targeted growth endeavors and the exploration of further investment opportunities within our core operations.”
Fathom has also sought to raise money by issuing additional shares and restructuring agent transaction fees.
In December, Fathom raised $4.2 million after expenses in an offering of 2.45 million shares of common stock at $2 per share. Harley sold 1 million shares in the December offering, but still owns 4.18 million shares, or 20 percent of the company, as of March 31, the company said in a regulatory filing.
At the beginning of 2023, Fathom Realty raised its agent transaction fees by 10 percent, to $550 for the first 15 completed transactions. After the first 15 transactions, agents currently pay $150, up from $99 before the increase.
This year, a revised agent commission structure that took effect Jan. 1 added a new “high-value property fee” on sales of properties valued at more than $600,000, and raised Fathom’s annual agent fee by $100, to $700.
In March Fathom Holdings announced that its Verus Title Inc. subsidiary has established a joint venture with individual teams and top-producing Fathom agents throughout Texas.
The joint venture, Verus Title Elite Texas LLC, launched in April, and Fathom plans to expand the new joint venture model to additional states this year. The goal is to have joint ventures in most of the 30 states where Verus Title operates by the end of 2025.
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