CONCLUDE

Detroit-based Quicken Loans submitted documents late Tuesday afternoon to launch the mortgage bank under the new name Rocket Companies, but remains in control of founder Dan Gilbert.

The filing with the US Securities and Exchange Commission is a preliminary application for listing on the New York Stock Exchange. The application does not provide a date for the IPO or the price per share.

Gilbert, founder and chairman of Quicken Loans, would retain significant control over rocket companies after the IPO. The Rocket Companies stock symbol would come from “RKT”.

Rocket Companies consists of several Gilbert companies – not just Quicken Loans – that employ a total of around 20,000 people.

Other companies under the Rocket umbrella are the title company Amrock, the home search platform Rocket Homes, the provider of personal loans Rocket Loans, the call center Rock Connections and a relatively new used car business called Rocket Auto.

In recent years, the company has gradually discontinued its “Quicken Loans” brand in favor of the “Rocket” brand, which it calls “the synonym for providing simple, fast, and trustworthy digital solutions for complex personal transactions”.

In industry publications, the company is ranked as the nation’s leading mortgage lender for direct customers.

More: Quicken Loans IPO: Why it takes money and who gets rich

More: Quicken Loans can offer shares to the public, CNBC reports

Gilbert keeps the reins

The coronavirus pandemic and the economic impact in the spring dampened the IPO market, but activity increased in June as many offerings have a digital focus. The online used car dealer Vroom, for example, skyrocketed on the first day of trading.

David Kudla, CEO of Mainstay Capital Management, said the SEC filing shows that Gilbert will essentially have full control of the company through 79% of the combined voting rights of the common shares.

“The deal is being constructed so that Dan Gilbert maintains a ‘super majority position,'” said Kudla.

He said a super majority is generally classified as 67% to 90% property. “Essentially, Dan Gilbert remains in full control of the company,” he said.

58-year-old Gilbert has recovered from a severe stroke in May 2019.

Finance revealed

For the first time, the filing publicly reveals key financial details about Gilbert’s business.

Rocket Companies had total sales of $ 5.1 billion in 2019 and net sales of $ 894 million. In the first three months of 2020, the company had a net profit of $ 97 million, compared to a net loss of $ 299 million for the same three months in 2019.

Most of Quicken Loan’s mortgage business, according to the filing, includes refinancing activities, and home purchases accounted for 27% of last year’s mortgage volume.

“In the past, our origins were more refinanced than the entire origination market,” the file says.

Most of the $ 145 billion mortgage Quicken had taken out last year, or 91%, was sold to government-backed companies such as Fannie Mae and Freddie Mac who insure such non-payment loans. This means that Quicken would generally not be on the hook if these mortgages later turned sour.

Quicken then serves all of the mortgages it sells to government-sponsored companies by collecting borrowers’ principal and interest payments and passing them on to the investors who ultimately own the loans.

Overall, as of June 30, approximately 5% of all mortgages Quicken Loans offered were lenient as borrowers failed to make payments due to the coronavirus pandemic. The indulgences have not caused Quicken a significant problem, the file says.

The filing discloses the sources of Quicken’s funding sources for mortgaging. The company has nine “credit financing facilities” that can provide up to $ 16.25 billion, of which seven are large global financial institutions.

In addition, the company had $ 2.6 billion in cash and unused lines of credit of $ 1.2 billion as of May 31.

Quicken Loans CEO Jay Farner earned a total of $ 11.7 million last year, translating into a base salary of $ 650,000 and bonus money of over $ 11 million.

Power of ISMs

The submission contains detailed information on Gilbert’s “ISMs” or core principles for doing business with Rocket Companies, which serve as the “cultural operating system for decision-making by all of our team members”.

“Each of our approximately 20,000 team members is authorized to use the ISMs in all aspects of their work and their lives,” the file says. “The ISMs define our culture and our management. This combination of a competent team with a common, clearly defined mission gives us a significant strategic advantage in the market.”

Gilbert started Quicken Loans in the mid-1980s under the name Rock Financial.

The company became one of the first online mortgage lenders in the late 1990s, after years of physical establishment, and went public in 1998. At that time, Rock Financial was only a fraction of Quicken’s current size.

Rock Financial was sold to Intuit, the maker of Quicken software products, for $ 532 million in 1999. Gilbert continued the renamed company and bought it back together with a group of private investors for $ 64 million from Intuit in 2002. This included Title Source, now called Amrock.

Quicken Loans continues to license Intuit’s Quicken name and brand under an open-ended, “licensed” agreement.

Meet the board

Gilbert’s wife, Jennifer Gilbert, 51, is a member of the Rocket Companies Board of Directors.

The other directors and top executives are:

  • Dan Gilbert, CEO
  • Farner, CEO and director
  • Robert Walters, President and Chief Operating Officer
  • Julie Booth, CFO and treasurer
  • Angelo Vitale, General Counsel and Secretary
  • Matthew Rizik, a director
  • Suzanne Shank, a director
  • Nancy Tellem, a director

Contact JC Reindl:313-222-6631 or [email protected]. Follow him on Twitter@jcreindl. Read more about the business and subscribe to our business newsletter.

Read or share this story: https://www.freep.com/story/money/business/2020/07/07/quicken-loans-files-ipo-paperwork-rocket-companies/5394080002/