By Peter Rudegeair 

Detroit businessman and Cleveland Cavaliers owner Dan Gilbert spent the past 35 years building Quicken Loans into a mortgage lending giant and an extension of his personal brand. That won't stop when the company goes public.

Rocket Companies Inc., which owns Quicken Loans, filed paperwork this week to potentially list its shares on the New York Stock Exchange. In it, the company revealed that Mr. Gilbert's holding company will continue to control 79% of the voting power of Rocket Companies' common stock following its IPO. Two of Rocket Companies' board seats are held by Mr. Gilbert and his wife, Jennifer Gilbert, an interior designer and entrepreneur who was named a director in March.

Rocket Companies is the latest business to attempt a public listing after the fallout from the coronavirus pandemic kept the market for new issues quiet in early spring. In recent weeks, Warner Music Group Corp., grocery giant Albertsons Cos. and online used-car seller Vroom Inc. all completed public offerings. Earlier this week, Palantir Technologies Inc., one of Silicon Valley's oldest startups, confidentially submitted IPO paperwork.

Unlike many tech startups that have gone public in recent years, Rocket Companies is profitable. The company's net income rose 46% in 2019 to $892.4 million on revenue of $5.1 billion. Quicken Loans extended $145 billion of mortgages last year, and gains on the sale of those loans to money managers represented the bulk of the revenue it generated.

Quicken was the biggest mortgage lender in the U.S. in the first quarter, according to industry research group Inside Mortgage Finance, beating out longtime heavyweights like Wells Fargo & Co. and JPMorgan Chase & Co.

The ties between Rocket Companies and Mr. Gilbert's other businesses will remain tight following the IPO, according to the new securities filing. Jay Farner will continue to be the chief executive of Rocket Companies after the IPO. Mr. Farner will also continue to be CEO of Mr. Gilbert's holding company, Rock Holdings Inc., that will control the majority of Rocket Companies' shares.

The company warned potential shareholders that the arrangement could create "actual or apparent conflicts of interest" if certain issues arise between the two entities.

Rock Holdings Inc. is also the controlling shareholder of several other businesses, including Dictionary.com, according to the filing.

The IPO paperwork also reveals a series of commercial relationships that Mr. Gilbert's businesses have with one another. Quicken Loans and another Rocket Companies unit paid nearly $100 million in rent, fees and other real-estate costs to companies affiliated with Mr. Gilbert since the start of 2019, including rent for the Detroit headquarters. Rocket Companies also spent $24.1 million to buy additional parking rights from Bedrock Management Services LLC, Mr. Gilbert's real-estate investment firm, over that same time frame.

Rocket Companies paid the Cleveland Cavaliers, of which Mr. Gilbert is the majority owner, roughly $10 million for naming rights and other advertising costs since the start of 2019. Over that same period, the company paid $1.5 million to license the name and marks of a League of Legends competitive videogaming team that is an affiliate of Mr. Gilbert. In recent years Quicken Loans also lent millions of dollars to other businesses Mr. Gilbert owns, including Fathead LLC, a company that makes giant wall decals featuring professional athletes.

In the years since the financial crisis, banks have slowly retreated from mortgage lending, providing an opportunity for Quicken Loans and other specialty lenders to gain share.

Nonbanks made 59% of U.S. mortgages last year, the highest level on record, according to Inside Mortgage Finance.

Rocket Companies said in its filing that a slowdown in home sales and rise in delinquent mortgage payments due to the coronavirus pandemic could hurt its business. About 98,000 Quicken Loans borrowers are currently enrolled in forbearance plans, or roughly 5% of the total loans the company services.

Write to Peter Rudegeair at Peter.Rudegeair@wsj.com

(END) Dow Jones Newswires

July 08, 2020 15:32 ET (19:32 GMT)

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