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Quicken Loans files paperwork for IPO under name Rocket Companies

Detroit-based Quicken Loans, the nation's largest mortgage lender, has filed paperwork with the U.S. Securities and Exchange Commission to move forward with taking the company public under the name Rocket Companies.

Although the company has not yet announced the number or price of shares that would be offered on the New York Stock Exchange, experts have speculated an initial public offering by Quicken could raise tens of billions of dollars. No date was given for the proposed IPO.

Quicken Loans founder Dan Gilbert

Under the proposal made public Tuesday, Quicken founder Dan Gilbert would retain a controlling stake in Rocket Companies via a multi-tiered stock structure. The structure would offer A, B, C and D stock classes, with Class B and Class D stockholders having 10 votes to every one vote of Class A and C stockholders. Gilbert would maintain 79% of the voting power.

That would give Gilbert the final say over the election of board directors, any changes to the company's certificate of incorporation, bylaws, and any proposed merger or sale of the company's assets, according to the filing.

A news release from Rocket Companies described itself as a Detroit-based holding company consisting of personal finance and consumer service brands including consisting of Rocket Mortgage, Rocket Homes, Rocket Loans, Rocket Auto, Rock Central, Core Digital Media, Rock Connections, Lendesk and Edison Financial.

A spokeswoman for Rocket Companies declined Tuesday to comment.

Stock would trade under the ticker name "RKT."

The company lists a figure of $100 million for the initial public offering, but the form notes that number is simply an estimate used to calculate a registration fee; the actual amount the company is seeking to raise is likely to be different.

The filing includes a letter from Quicken Loans CEO Jay Farner, highlighting the company's digitization of the mortgage lending process with its launch of the online Rocket Mortgage platform in 2015.

"Rocket Mortgage took three years to get right because we refused to bring an inferior product to market," he wrote. "We saw a need and knew what it would take to revolutionize an industry. We will never settle for just 'good enough' to garner publicity or to meet arbitrary deadlines. We love complex markets with complex problems, and we have a team of 20,000 people who have a track record of making the complex simple."

A prospectus included in the filing notes that Rocket Mortgage has provided more than $1 trillion in home loans since it launched, and reports the company's market share has climbed from 1.3% in 2009 to 9.2% in the first quarter of 2020.

Quicken closed $145 billion in loans last year.

Quicken, along with founder Dan Gilbert's other companies, is the largest employer in Detroit.

David Kudla, founder, CEO and chief investment strategist of Mainstay Capital Management LLC, said it's a good time for the company to go public, given its established brand, the strength of mortgage companies right now and the fact that they have a "stable, profitable business model. If they are going to do it, this is a very opportunistic time for them to do an initial public offering in terms of maximizing their potential of an IPO."

“They are in an enviable position because of their position in the market. It’s a strong company, profitable company, and they have the opportunity to raise a lot of money right now,” Kudla said.

With mortgage rates hitting historic lows and the U.S. Federal Reserve indicating it will keep benchmark rates low, experts have said it's a good time for a mortgage lender to capitalize on that. The 30-year mortgage rate was 2.92% Tuesday, according to Mortgage News Daily.

“The IPO market is doing well, but who knows if it will be doing well 90 days from now,” said Erik Gordon, who is on the faculty of the University of Michigan's Ross Business School. “If you are thinking about going public and can go public now, then now is the time to do it."

There are three reasons to go public, Gordon believes: “One is you can raise some capital right now, the second is once you are public it is easier for you to to go back to the public market for another round. The third thing is being a public company gives people like Dan Gilbert another liquidity path.”

But there are also "costs and risks" associated with taking a company public: “It costs a lot of money to go public and it costs a lot of money to be public because every quarter you have to do filings with the SEC and comply with some expensive rules,” he said.

It also requires companies to reveal financial information they didn’t have to disclose before.

The paperwork filed Tuesday provides a look into the company's finances. The company, which employs 20,000 people, recorded $893.4 million in profit in 2019 on revenue of more than $5.1 billion, according to the filing.

Gilbert founded Quicken's predecessor in 1985. He briefly sold it to Canadian financial software firm Intuit Inc. for $532 million in 1999, before buying it back three years later for $64 million.

The company announced in 2010 that it would move its headquarters from Livonia to downtown Detroit's One Campus Martius. Via the real-estate arm of the Rock Family of Companies, Gilbert has been a leading force behind the rehabilitation of downtown, purchasing and renovating more than 100 buildings that are mostly located in the city's core. Gilbert is also a major real-estate investor and developer in downtown Cleveland, and owns the Cleveland Cavaliers basketball team.

Reports of Quicken Loans looking to go public surfaced in early June and was first reported at that time by CNBC. 

Asked in June about the reports, the company said through a representative that it "is continuously looking for new ways to invest in and grow our business, while also contributing in significant ways to our home communities."

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