The Chase Tower, owned by Bedrock Real Estate Services, is home to Quicken Loans, and is seen looking north of Woodward from One Detroit Center in 2015 in Detroit. (Photo: Salwan Georges, Detroit Free Press)
Detroit-based Quicken Loans filed paperwork late Tuesday afternoon to take the mortgage company public under the new name Rocket Companies, but will keep founder Dan Gilbert in control.
The filing with the U.S. Securities and Exchange Commission is a preliminary application for a listing on the New York Stock Exchange. The application doesn’t give a date for the initial public offering or the price per share.
Gilbert, Quicken Loans founder and chairman, would retain significant control of Rocket Companies after the IPO, according to the application. Rocket Companies’ stock symbol would by “RKT.”
Rocket Companies is comprised of several Gilbert-owned companies — not just Quicken Loans — that altogether employ about 20,000 people.
Other companies under the Rocket umbrella include title company Amrock, home search platform Rocket Homes, personal loans provider Rocket Loans, call center Rock Connections and a used car business called Rocket Auto that is relatively new.
The company has been gradually phasing out its “Quicken Loans” brand in recent years in favor of the “Rocket” brand, which it calls “synonymous with providing simple, fast and trusted digital solutions for complex personal transactions.”
Industry publications rank the company as the nation’s No. 1 direct-to-consumer mortgage lender.
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Gilbert keeps the reins
The coronavirus pandemic and the economic fallout in the spring put a damper on the IPO market but activity increased in June, with many offerings having a digital focus. Online used car seller Vroom, for example, skyrocketed in its first day of trading.
David Kudla, CEO of Mainstay Capital Management, said the SEC filing indicates that Gilbert will essentially have full control of the company through 79% of the combined voting power of the common stock.
“The deal is being constructed so Dan Gilbert maintains a ‘super majority position,’ ” Kudla said.
He said a super majority is generally classified as 67% to 90% ownership. “Essentially, Dan Gilbert is maintaining full control of the company,” he said.
Gilbert, 58, has been recovering from a serious stroke he suffered in May 2019.
Detroit businessman Dan Gilbert received Crain’s Newsmaker of the Year award at the Grand Ballroom at the MGM in February 2020. It was his first major public appearance since suffering a serious stroke in May 2019. (Photo: Mandi Wright, Detroit Free Press)
The filing publicly discloses key financial details about Gilbert’s businesses for the first time.
Rocket Companies had $5.1 billion in total revenue and $894 million in net revenue in 2019. For the first three months of 2020, the company had $97 million in net income, compared with a net loss of $299 million for the same three months in 2019.
The majority of Quicken Loan’s mortgage business involves refinancing activity, according to the filing, and 27% of its mortgage origination volume last year was home purchases.
“Historically, our originations have been more heavily refinancings than the overall origination market,” the filing says.
Most of the $145 billion in mortgages that Quicken originated last year, or 91%, were sold to government-backed entities such as Fannie Mae and Freddie Mac that insure such loans against default. That means Quicken would generally not be on the hook if those mortgages later soured.
Quicken then services all the mortgages it sells to government-backed entities by collecting and advancing borrowers’ principal and interest payments to the investors that will ultimately own the loans.
Overall, about 5% of all the mortgages that Quicken Loans services were in forbearance as of June 30 with the borrowers not making payments because of the coronavirus pandemic. The forbearances have yet to present a significant problem for Quicken, the filing says.
The filing discloses the sources of Quicken’s financing sources for making its mortgages. The company has nine “loan funding facilities” that can provide up to $16.25 billion, seven of which are large global financial institutions.
Additionally, as of May 31, the company had about $2.6 billion in cash and $1.2 billion in undrawn lines of credit.
As for salary disclosures, Quicken Loans CEO Jay Farner made a total $11.7 million last year, which broke down as a $650,000 base salary and $11 million-plus in bonus money.
Power of the ISMs
The filing includes extensive detail about Gilbert’s “ISMs,” or core principles for doing business at Rocket Companies that serve as “a cultural operating system to guide decision making by all of our team members.”
“Each of our approximately 20,000 team members is empowered to apply the ISMs in all aspects of their work and life,” the filing says. “The ISMs define our culture and how we conduct business, and this combination of an empowered team with a common, well-defined mission provides us with a significant strategic advantage in the market.”
Gilbert started Quicken Loans in the mid-1980s with the name Rock Financial.
The business became one of the first online mortgage lenders in the late 1990s after years of having physical branch offices, and in 1998 it did an IPO. Back then, Rock Financial was only a sliver of Quicken’s current size.
Rock Financial was sold in 1999 to Intuit, the maker of Quicken software products, in a deal reportedly worth $532 million. Gilbert continued to lead the rebranded company and, in 2002, with a group of private investors, he bought it back from Intuit for $64 million in a deal that included Title Source, now called Amrock.
Quicken Loans continues to license the Quicken name and trademark from Intuit under a perpetual “royalty-bearing” agreement, the filing says.
Meet the board
Gilbert’s wife, Jennifer Gilbert, 51, is among the members of Rocket Companies’ board of directors.
The other directors and top executives are:
- Dan Gilbert, chairman of the board
- Farner, CEO and a director
- Robert Walters, president and chief operating officer
- Julie Booth, chief financial officer and treasurer
- Angelo Vitale, general counsel and secretary
- Matthew Rizik, a director
- Suzanne Shank, a director
- Nancy Tellem, a director
New product coming
The filing also says the company is currently developing a new automated underwriting product called “RocketLogic” that will overhaul the way it originates loans.
“RocketLogic leverages data and asks dynamic questions, resulting in client’s closing their mortgage faster and with greater accuracy,” it says.
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