Shares of Rocket Cos, parent of Quicken Loans, rose after their initial public offering, a smaller-than-expected issuance reflecting investors’ hesitance amid cloudy economic forecasts.
The Detroit company late Wednesday priced 100 million shares at $18 each.
At last check the shares, trading under the symbol RKT, were 7.4% higher at $19.40.
Rocket had originally expected to raise as much as $3.3 billion via 150 million shares at $20 to $22. The underwriters also had had an option on 22.5 million more shares at the IPO price.
The Wall Street Journal reported, citing Dealogic data, that for this year, that earlier offering size would have been second only to the $4 billion that the hedge-fund manager Bill Ackman raised last month with his blank-check company Pershing Square Tontine.
Even at the lower IPO price, the listing values the mortgage company at about $35 billion, Bloomberg News reports.
The company’s Securities and Exchange Commission Form S-1 dated July 28 had said that Rocket's founder and chairman, Dan Gilbert, through a separate class of stock would hold 79% of the combined voting power of the common stock. Gilbert also owns the Cleveland Cavaliers of the National Basketball Association.
Quicken is the largest retail mortgage originator in the U.S., underwriting about $145 billion in 2019, Bloomberg reported.
For the 2020 first quarter, Rocket reported net income of $97.3 million, swinging from a net loss of $299.3 million for the year-earlier quarter. Revenue more than doubled to $1.37 billion from $631.8 million a year earlier.
The mortgage market has been one of the rare exceptions to the rule that the coronavirus pandemic has crushed the U.S. economy.
Mortgage origination volumes were at record levels in March, April, May and June as lower interest rates prompted homeowners to refinance, Bloomberg said. And the Journal points out that a tight housing supply has kept home prices high. Many younger people are moving to the suburbs and wealthier city residents are looking for second homes.
At the same time, with consumers crunched by the loss of their jobs during the pandemic, many consumer lenders are awaiting what could be a rush of loan defaults later this year.
Among the risk factors the company lists, covid-19 is first.
"While the pandemic's effect on the macroeconomic environment has yet to be fully determined and could continue for months or years," the SEC filing says, "we expect that the pandemic, and governmental programs created as a response to the pandemic, will affect the core aspects of our business.
"[These include] the origination of mortgages, our servicing operations, our liquidity and our employees. Such effects, if they continue for a prolonged period, may have a material adverse effect on our business and results of operation."