(Reuters) – Shares of Rocket Cos Inc <RKT.N> rose 15% following their New York debut on Thursday, a day after the parent company of U.S. mortgage lender Quicken Loans slashed the targeted size of its initial public offering by over $1 billion.
Rocket shares were trading up at $20.84 after they opened flat at $18.00 a share, the same as its IPO price.
Rocket’s relatively lukewarm flotation comes at a time when U.S. capital markets are in the middle of a stellar recovery after the COVID-19 pandemic put several debuts on hold earlier this year.
The IPO pricing and deal size suggests Rocket struggled to convince investors its mortgage platform business deserved the kind of valuation that is usually handed out to Silicon Valley tech unicorns.
“You’re seeing a low-rate environment in conjunction with decreased (mortgage) applications,” said Michael Underhill, chief investment officer for Capital Innovations, which invests in IPOs.
“So, investors are being very cautious, very surgical and … if it’s not a rock-solid business model, they’re not really interested in buying at the IPO.”
The company sold 100 million shares, down from 150 million it had planned for the IPO, to raise $1.8 billion, which valued the company at around $36 billion.
At its IPO price of $18, it is now the third-largest U.S. listing of 2020, excluding blank-check companies. Only Royalty Pharma <RPRX.O> and Warner Music Group <WMG.O> have had bigger stock market debuts this year.
Within its original price range of $20-$22, Rocket could have become the largest U.S IPO of the year.
Rocket, founded by billionaire Dan Gilbert in 1985, said earlier this month it expects a profit of more than $3 billion in the second quarter, compared with a loss last year.
Goldman Sachs, Morgan Stanley, Credit Suisse and JPMorgan were among the underwriters for the IPO.
(Reporting by Anirban Sen in Bengaluru; Editing by Shinjini Ganguli and Shounak Dasgupta)