eResearch | Last week saw three high profile companies launch IPOs with different outcomes.
Rocket Companies
Detroit-based Quicken Loans, a retail mortgage originator in the U.S., launched its IPO under the name Rocket Companies (NYSE: RKT), selling 100 million shares at US$18 per share, raising US$1.8 billion, which valued the Company at US$36 billion.
However, Rocket Companies fell short from its original plan to sell 150 million shares in the price range of US$20 to US$22, which would have increased the funding by another US$1 billion.
The lower valuation was potentially due to investors struggling to justify Rocket Companies’ valuation as a tech company rather than a financial services firm.
Rocket Companies’ stock price surged more than 20% on its first day of trading, and is currently trading at US$22.50/share, a 22.4% increase since the IPO launch date.
Rocket Companies is a family of personal finance and consumer brands, who mainly generates income through the sale of loans on the secondary market, in addition to originating new mortgages and loans through its innovative digital platform, Rocket Mortgage.
In 2018, Rocket Companies announced it surpassed 30,000 lenders to become the largest mortgage originator in the U.S., with US$145 billion in originations last year, of which 27% consisted of clients purchasing homes. In Q1/2020, Rocket Companies originated US$51.7 billion in loans.
Last month, eResearch published an article with further information on Rocket Companies’ S-1 Prospectus and its online mortgage platform:
PHOTO 1: Rocket Companies Portfolio of Businesses
Rackspace Technology Inc.
Rackspace Technology Inc. (NASDAQ: RXT), a cloud service provider and data centre operator based in the U.S., launched its IPO at the bottom of its pricing range at US$21/share, raising US$704 million and providing a valuation of approximately US$4.2 billion.
In 2016, Rackspace was taken private in a US$4.3 billion leveraged buyout deal from private-equity firm Apollo Global Management Inc. (NYSE: APO), who is expected to retain 65% of the voting power in Rackspace after the IPO.
Rackspace is a cloud computing services pioneer, focused on providing cloud enterprise solutions for apps, data, and security, who grew through M&A with recent acquisitions including RelationEdge LLC and Onica Group LLC, two technology companies complementing managed cloud services capabilities.
In Rackspace’s latest quarter ending March 31, it reported Revenues of US$653 million, a 7.5% increase year-over-year, with a Net loss of US$48.2 million compared with a Net loss of US$57.5 million the prior year. The balance sheet consisted of Cash and cash equivalents of US$125 million, total assets of US$6.3 billion, and Total liabilities of US$5.5 billion.
Rackspace dropped in stock price by over 20% on its first day of trading, and is currently trading below US$16 per share, a 24% decrease from its IPO listing price.
BigCommerce
Last week, BigCommerce Holdings Inc. (NASDAQ: BIGC), a U.S. technology company focused on providing a SaaS ecommerce platform, raised its listing price for its IPO to US$24/share, compared with its initially announced price range of between US$18 and US$20.
The IPO price increased total proceeds to US$216 million for BigCommerce, valuing the tech company at approximately US$1.6 billion. Last year, BigCommerce raised US$64 million in growth equity funding, with a total of over US$200 million in funding to date before the IPO.
BigCommerce’s ecommerce platform has over 60,000 stores in more than 100 countries, serving large customers such as Sony Corp. (TYO: 6758; NYSE: SNE) and competing against leading ecommerce platforms such as Shopify Inc. (TSX: SHOP).
In BigCommerce’s latest quarter ending March 31, it reported Revenues of US$33 million, a 30% increase year-over-year, with a Net loss of US$4 million compared with a Net loss of US$10.5 million the prior year. The balance sheet consisted of Cash and cash equivalents of US$33 million, Total assets of US$82 million, and Total liabilities of US$118 million.
BigCommerce’s stock price jumped by over 250% on its first day of trading, and is currently trading at US$76.72/share, a 219% increase from its IPO listing price.
IPO Market 2020
Starting in March, the COVID-19 pandemic severely impacted new company listings as the stock markets dropped significantly in light of economic uncertainties.
According to EY’s report, global IPO activity dramatically dropped in April and May, as deal volume dropped by 97 deals, a 48% decrease year-over-year, while deal proceeds dropped by US$13.2 billion, a 67% decrease year-over-year.
However, IPO activity has recently started to climb back up, mainly in industries including healthcare, technology, and investment services.
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