IPO

Rocket Trims IPO 39 Pct From $3.3B To $2B After Investors Reject Valuation

Rocket Mortgage app

Rocket Companies, the parent of mortgage lending giant Quicken Loans, reduced its terms to go public, Bloomberg reported.

The company, founded by billionaire Dan Gilbert, is seeking to raise about $2 billion in an initial public offering (IPO). The Detroit-based company is expected to market a reduced number of shares at about $18 to $20 apiece, Bloomberg reported, citing sources.

Last month, Gilbert sought an IPO for $3.3 billion and offered 150 million shares for $20 to $22 each, according to a filing with the Securities and Exchange Commission (SEC).

The 39 percent reduction came as investors rejected the company’s valuation, noting it should be priced as a consumer or financial company rather than a technology business, one of the sources said, according to Bloomberg.

The report stated the downsizing may signal the IPO market’s worry as the pandemic deepens across much of the U.S., stalling the reopening of the economy in some states and the return to classrooms in some school districts.

If approved, Rocket would be listed on the New York Stock Exchange, under the ticker “RKT.”

Rocket describes itself as the largest retail mortgage lender in the U.S.

Gilbert, owner of the Cleveland Cavaliers and founder of Quicken Loans will retain 79 percent of the voting power of the company’s common stock through controlling entities, the SEC filing shows.

MarketWatch reported there are 20 banks underwriting the deal, led by Goldman Sachs. Proceeds of the transaction will be used to purchase businesses and Class D stock from Rocket Companies’ existing holding company, Rock Holdings Inc., which is owned by Gilbert.

David Kudla, CEO of Mainstay Capital Management, said the SEC filing indicates Gilbert will essentially have full control of the company through the combined voting power of the common stock, according to a previous PYMNTS report.

“The deal is being constructed so Dan Gilbert maintains a ‘super majority position,’” he said, noting a super majority is generally classified as 67 percent to 90 percent ownership. “Essentially, Dan Gilbert is maintaining full control of the company.”

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