Rocket Companies, the parent of America’s largest mortgage provider Quicken Loans, slashed the price and the size of its initial public offering on Wednesday, said three people briefed on the matter.
The company has decided to sell 110m shares at $18 each, raising roughly $2bn for its owners, led by its founder Dan Gilbert.
The company had earlier planned to raise as much as $3.3bn in the offering and initially marketed 150m shares at a price between $20 and $22 each, according to filings with US securities regulators last week.
At the new, lower price, the company is valued at $35.7bn, not the $44bn implied by the top of the original range.
Quicken had hoped for a strong reception after becoming one of the big financial beneficiaries from the fall in interest rates this year, which led to a jump in mortgage refinancing and increased the profits mortgage lenders can make.
In the first quarter, Quicken refinanced $52bn in loans — double the amount for the same period a year earlier.
But the outlook is muddied by questions over the US economy and in particular the housing market, where more than 8 per cent of borrowers are not currently paying their mortgage thanks to forbearance plans instituted by the federal government and lenders.
Non-bank lenders such as Quicken faced down a liquidity crunch earlier in the year due to a sudden jump in forbearance on loans they continue to service even after the loans themselves have been sold on to bondholders. Servicers are on the hook for some payments to bondholders, regardless of whether the homeowner is paying.
Quicken Loans overtook Wells Fargo to become the largest home mortgage lender in the US two years ago, and last year originated $145bn in loans.
It made $893m in net income last year, up 46 per cent from 2018, and in the first quarter of 2020 it generated $97m in net income on $1.4bn in revenue.
The listing is on pace to be the second-largest US IPO of the year excluding cash shell companies, behind Royalty Pharma, which raised $2.2bn in June. This week’s other marquee flotation, the cloud computing company Rackspace, fizzled on its debut, pricing at the bottom of the range and then falling 22 per cent on Wednesday.
“I think investors are being extra cautious in these times,” said Michael Underhill, chief investment officer for Capital Innovations, a fund manager that invests in IPOs.
Mr Gilbert founded his company in 1985 and will retain control after the flotation. Rock Holdings, a private entity he controls, will own more than three-quarters of the voting power, according to filings.
Mr Gilbert, who is also the owner of the Cleveland Caveliers basketball team, is recovering from a stroke he suffered last year.
The underwriters managing the IPO include Goldman Sachs, Morgan Stanley, Credit Suisse, JPMorgan and RBC Capital Markets.
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Quicken Loans slashes price and size of IPO - Financial Times
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