Dan Gilbert Will Keep Voting Control at Quicken Loans Parent After IPO -- Update
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
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'
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 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.
Mr. Gilbert suffered a severe stroke last year. He is back to
work but spending hours each day in therapy.
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 16:30 ET (20:30 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.