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Experts React To Rocket Companies' Liftoff After IPO Fundraising Misses Target

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Experts React To Rocket Companies' Liftoff After IPO Fundraising Misses Target

Rocket Companies, Inc. (NYSE: RKT) shares were trading higher on their second day of trading and are now up about 30% from their $18 IPO price.

The huge initial open market demand comes as a relief for investors concerned that the IPO itself priced below the company’s target range.

Rocket Stock Takes Off: Rocket initially planned to sell 150 million shares in its IPO at a price range between $20 and $22. The company ended up selling 100 million shares at $18.

Detroit-based Rocket was founded by Dan Gilbert and is the parent company of mortgage lender Quicken Loans. In an interview on CNBC, Rocket CEO Jay Farner said the initial public reception for the stock is more important than the IPO itself.

"The investor base for our opening was probably the most important thing," the CEO said. "So we focused on that versus selling as many shares as we possibly could."

Robinhood traders were among the most aggressive Rocket buyers on the stock’s first day of trading. More than 54,000 Robinhood accounts bought the stock on Thursday, according to Robintrack. By midday Friday, 74,013 Robinhood investors owned shares.

Experts React To Rocket IPO: The pricing of the Rocket IPO and the subsequent trading of the stock suggests underwriters were playing it safe and underestimating demand, Kevin Schultz, chairman of Triad Securities, told Benzinga. 

“They should have opened the stock up at around $20 or $21. I think there would have been a lot of people that wanted to buy it there. Look, they’re paying up now. So I don’t know why they opened it at $18 and let it break. That’s an indication that [underwriters] didn’t want to pay up for the stock themselves,” Schultz said.

Eric Krull, author of "The Lifecycle Trade: How to Win at Trading IPOs and Super Growth Stocks,” told Benzinga Rocket likely had a mixed reaction to its IPO and subsequent stock performance because the company was unable to raise as much capital as it had hoped.

“They found the demand for shares at the IPO offering was weaker than expected. But once the lower number of shares hit the open market, the demand for those shares was very good, at least on day one. Those funds/investors who were allocated shares are very happy with the day one performance,” Krull said.

RKT Price Action: Rocket Companies shares were trading at $23.44 on Friday afternoon. 

Benzinga’s Take: While the Rocket IPO itself may have missed the company’s funding targets, both IPO investors and early open market buyers are now sitting on huge gains and are certainly happy with how the company’s market debut has played out.

Investors will now turn their attention to Rocket’s first quarterly earnings report as a public company.

 

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