Rocket Companies (RKT), the parent company of Quicken Loans is set to IPO tomorrow at an expected $22 per share. The country’s top mortgage lender is expected to price its IPO below expectations at $18 a share, according to people familiar with the matter.
Rocket Companies, parent of Quicken Loans, is also likely to sell about 100 million shares in its offering, fewer than the 150 million the company had originally planned, the sources said. The smaller-than-expected offering, at a lower price, illustrates how even as the IPO market has warmed in recent months, investors are still sensitive to price when the coronavirus has invaded our economy.
Rocket Companies will list on the New York Stock Exchange under the ticker RKT. It is expected to start trading Thursday.
Rocket is now even further away from the $4 billion that hedge-fund billionaire Bill Ackman raised for his blank check firm, Pershing Square Tontine, in the biggest IPO of the year. The latter firm is targeting “mature unicorns,” making it a far different proposition for investors.
Rocket has seen income surge as an historically-low interest environment has led to more borrowing by U.S. consumers. According to its IPO prospectus, it serves clients in all 50 states and originated over $145 billion in residential mortgage loans in 2019. In the quarter ended March 31 alone, it originated $51.7 billion.
Rocket said last month it expected a second-quarter profit of more than $3 billion in Q2. This compares to a loss the previous year.
Mortgage shift benefits Quicken Loans and Rocket Companies (RKT)
Quicken’s rise underscores a shift in the mortgage market. Banks have taken a step away from mortgage origination and servicing following the financial crisis. This left a gap for the likes of Quicken.
A record 59% of U.S. mortgages were issued by nonbanks last year, according to Inside Mortgage Finance. Quicken was also the largest mortgage lender during the first six months of 2020.
Underwriters for the offering include Goldman Sachs, Credit Suisse, JPMorgan, RBC Capital Markets and Morgan Stanley. The deal bolsters the case for a recovery of the U.S. IPO market, though the price cut has damaged the thesis. The IPO space was hit after the coronavirus pandemic led to a stock market crash. This shut down the IPO market for about two months.
The emergence of Quicken reflects a change in the mortgage industry. After the financial crisis, banks took a move away from their mortgage roots and servicing. This quickly made Quicken’s like a void.
According to Inside Mortgage Finance, 59 percent of US loans were provided by nonbanks last year. In the first six months of 2020, Quicken was also the biggest mortgage lender.
Goldman Sachs, Credit Suisse, JPMorgan, RBC Capital Markets, and Morgan Stanley are among the contractors involved. The agreement strengthens the case for US rehabilitation. Although the cost reduction influenced the study, the IPO market. The room of the IPO has been affected by the coronavirus pandemic.
Should you invest in Rocket Companies (RKT) at IPO open?
Rocket Companies is set to trade Thursday, and investors are asking if they should invest. If you’re in for the long term this is an absolute buy. If you’re not sure then I recommend waiting a few months before hopping in.
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