Rocket Companies soars over 20% in debut

Rocket Companies soared over 20% in its IPO in a market that has been hurt by the coronavirus. Rocket Companies, Inc. CEO Jay Farner joins The Final Round panel to break down the details.

Video Transcript

MYLES UDLAND: It's been a very busy year, a busy week for new issues, and a company making its debut on the markets today is Rocket Companies. It's a parent of Rocket Mortgage by Quicken Loans, among other brands. And we're joined now by CEO of Rocket, Jay Farner. Jay, thanks for joining the program. Congratulations on getting stock to the market here.

I guess, let's just talk a bit about the process for you guys, what the roadshow was like, what investor demand is like, and if you're pleased with the performance you're seeing in stock on those first day of trading.

JAY FARNER: Yeah, absolutely. I'll tell you, it was an interesting experience. As you know, virtual road show, so I spent a lot of time talking to investors. I've been told that that really increased the opportunity for us to talk to investors. Really important to us because we have a very unique story. We're in the mortgage space. We're the largest lender in the country, controlling nearly 10% of the mortgage market right now, all built on a technology platform that we've been developing for over 20 years.

And so explaining that story, explaining the scale that we can reach, going from 50,000 closings here in the early part of the year up to 100,000 mortgage closings last month, these are important things we had to spend time talking to investors about. And I think it really worked out. When we look at the stock today, it's been performing well.

I think more importantly, when we look at our investor base, we're very pleased to have a strong, high quality base of investors, investors that are long investors thinking about this company over the next three, five, seven years, which is exactly how we've been thinking about it for the last 35 years.

MYLES UDLAND: And Jay, you mentioned some of the dynamics happening in the housing market right now. Obviously, you guys are seeing this on a longer timescale. But just in the last couple of quarters, what has stood out to you in terms of flow, whether it's for new borrowers, for refinancings? The housing market has really been a standout in the economy during a pretty tough period.

JAY FARNER: Yeah. There's some really interesting things happening this year. When we started in January and February, really strong home purchase demand. Our Rocket Mortgage application platform really focuses on first-time homebuyers, so we were pleased there. Then, of course, March happened. We were able to send 98% of our team members home for their safety with COVID and continue to grow.

That shifted to refinance. We set a record in March, the most closings we've ever had, while all of our team members or virtually all of them are working from home. And we saw rates dip down into the low 3%'s and the high 2%'s. And so now, we've got $10 trillion, $11 trillion dollars of mortgages that are in the money right now, and so you got to focus on helping those folks.

But as we got into June and July, we saw the housing demand come up. And as we do our research, what we're hearing is that there's been a fundamental shift in how people are thinking about owning homes. Folks that said they would never own a home now want to have a home. They're recognizing they may spend more time working out of the home. And so from a mortgage perspective and a real estate perspective, both on the refi side and the purchase side, we see a lot of opportunity.

SEANA SMITH: Hey, Jay. I wanted to ask you about that, because you've continued to gain market share. You just mentioned the fact that you had record closings in March. Rates dipped again. There's demand-- there's a lot of demand for people to buy homes. But my question to you is, do you see this momentum continuing? Are you worried at all about the environment cooling a little bit as we head into the fall and winter months?

JAY FARNER: You know, we see the momentum continuing. We've had great momentum. In fact, one of the reasons we've decided to go public is to ensure that we have another strategic lever we can pull to maximize that momentum. So we're worried about 9% or 10% market share today. Our goal is to reach 25% market share, which would be north of $40 billion in closings a month in a normalized mortgage market.

When we hear about the interest rates and where people see them staying over the course of the next six months or a year, and again, also watch the behavior in the housing market, the purchase market, we just see a lot of upside, especially with the brand that we've got.

As you probably know, we've invested billions of dollars in the Rocket brand to ensure that people think of that brand, they understand the quality, the innovation. And so leveraging that brand and all the other profitable levers that we've developed to grow our business, we couldn't be more excited about the future.

MYLES UDLAND: And then Jay, in thinking about that platform that you guys operate, obviously, the mortgage market is still one that is mired in paperwork. I've heard of folks who it's taking them two months-- you know, their approval might go through a two-month-long process to get a mortgage. Where is the market at, I guess, in terms of appreciating sort of the digital runway here that exists in this market that is still very much antiquated?

JAY FARNER: Yeah. Great question. And I think we're somewhere around 25, 30 days turn time from application to close, leveraging the technology we have. Our mission, of course, is to continue to shrink that turn time down and eliminate that paperwork. Our technology allows us to bring in, electronically, income data, asset data, credit data. In fact, on Rocket Mortgage, in as little as eight minutes, you can get a full approval to go be ready to purchase your home, but think about it as the highest quality approval because all of that real data we're able to pull and the engines we've built to underwrite those loans.

So capacity is critical. Understanding this platform is critical. And I think we're just in the early innings of telling that story. Starting at a $36 billion market cap and now watching that grow today is exciting. But as people understand our platform more, understand how scalable it is, see our brand out there more and more, I believe we'll continue to see the value of this company grow.

MYLES UDLAND: And Jay, you mentioned it [INAUDIBLE] earlier, you referenced it earlier, the timeline, I guess, for coming to the public market. How much did you guys internally change any plans you had about tapping the public market given the environment that we've seen, the favorable environment we've seen for new issues in the last couple months?

JAY FARNER: Yeah. So we were exploring this as we got into the fall of '19 and early 2020. Again, we've been private for 35 years. Our culture, our team members are so important to us. So that was our primary driver is, how do we open our opportunities to grow while protect our culture? And then we paused a bit, as you pointed out, in March and April, waiting to see what would happen with the economy, watching the demand in refinance, watching the demand in purchase, and then seeing other opportunities that may present themselves.

Strategically moving forward, we thought moving public now would give us an opportunity take advantage of some of the opportunities that may come. And the markets were so strong. I mean, I heard you guys talking before I jumped on about the NASDAQ right now. So it really seemed like all the forces were coming together to determine that right now was the right time to do the IPO.

MYLES UDLAND: All right. Jay Farner, CEO of the Rocket Companies, debuting for trade on the New York Stock Exchange today. Jay, congratulations on the new issue, and we'll be in touch in the future.

JAY FARNER: Absolutely. Thanks for having me.