IPO Market Update: Rocket Companies Finishes Up 20% After Reduced IPO
Rocket Companies (RKT) went public earlier this week selling 100 million shares of their common stock at $18 per share, raising $1.8 billion in gross proceeds.
The smaller than expected IPO transaction represented a downsizing of ambition for Rocket, which was originally known as Quicken Loans.
The firm originally filed to sell 150 million shares at $21.00, seeking to bring in as much as $3.1 billion, but was forced to significantly cut back its offering in order to go public with the large deal.
Rocket apparently sought to be valued as a technology company, when in reality it is a financial services firm with a technology-enabled system, so I imagine management was somewhat disappointed with the final outcome.
However, as the interview of Rocket’s CEO Jay Farner by TheStreet’s Katherine Ross covered, Rocket is now a publicly held firm and has additional capital to expand into adjacent markets as it indicated was its intention in its IPO filings.
The IPO proceeds will provide it with capital, increased visibility and the strategic ability to acquire companies with either cash or stock at a known valuation, which may help in its expansion efforts.
In recent months, RKT has seen sharply increased loan volumes, so the relative softness in demand for its IPO may have been a case of Rocket management seeking too big of an IPO.
The company may not be a darling of the Robinhood 'hot-money' social investing crowd, but in my view represents a solid competitor in the digital lending space and I expect the firm’s technology investment to pay off in the quarters ahead.
RKT finished its first day of trading at $21.51, an increase of 19.5% from its IPO price of $18.00.
While the IPO may not have been the rocket launch management had hoped for, RKT now has the fuel it needs to pursue its market expansion initiatives.