The initial public offering of Dan Gilbert's Rocket Companies Inc. will likely be the largest of 2020.
Jay Ritter, economist and initial public offering expert at the University of Florida, estimates the valuation of the holding company at approximately $20 billion. Only 21 percent, or about $4.2 billion worth of shares, will be sold at the offering.
Rocket Companies estimated $4.2 billion offering would be nearly twice the size of the second-largest IPO of the year. New York Royalty Pharma plc, which funds clinical trials for future drug royalties, had the largest biotech IPO in history on June 15, raising $2.2 billion.
Warner Music Group Corp. raised $1.9 billion and New Jersey business analytics firm Dun & Bradstreet Holdings Inc. raised $1.72 billion, both in June.
There have been a total of 67 IPOs in 2020, most raising well under $1 billion.
The reason Rocket Companies' valuation is so high is because of its profitability, Ritter said. Most of the year's IPOs are from nascent startups, looking to raise capital to bring a product more widely to market and turn a profit for the very first time.
"They are profitable and that puts in them in the minority of IPOs," Ritter said. "Only 22 percent of operating company IPOs have been profitable (this year)."
Rock Companies is also closely related to the fintech sector as a heavily technology-backed mortgage firm, which is also viewed favorably by investors, Ritter said.
"It is fintech and is consistently profitable," Ritter said. "While the revenue varies from year to year, it is an asset-light company using technology rather than having armies of employees soliciting mortgages. Tech companies disproportionately get most of the attention. Especially a company like that that has a lot of name recognition because a lot of home owners have used them."
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July 12, 2020 at 05:56PM
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How much will Rocket be worth? - Crain's Detroit Business
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