Mortgage origination technology firm Ellie Mae
priced its initial public offering between $9 and $11 per share.
The Pleasanton, Calif.-based firm, which hosts one of the largest electronic mortgage origination networks in the U.S., said it will offer 5 million shares with the firm's executive stockholders offering 2.5 million shares for a total of 7.5 million shares.
Ellie Mae intends to list the common stock on the New York Stock Exchange
under the symbol "ELLI." They expect net proceeds to be around $40 million, based on a $10 per share price.
Ellie Mae's network connects mortgage origination professionals to lenders, investors and service providers involved in the origination and funding of residential mortgages. Participants use the firm's Encompass software, which handles business and management functions for mortgage originators. The firm was founded in 1997. Sigmund Anderman, one of its co-founders, has served as CEO since the inception.
The firm's prospectus on the IPO points to "extreme turmoil in the mortgage industry" and notes that many mortgage originators — potential clients of the firm — have gone out of business since 2007. The company said its Encompass software users "declined 35% from approximately 79,000 on Dec. 31, 2006, to about 51,000 at the end of 2010."
During that period, "the number of active broker Encompass users declined by 80%, and 30 of the 44 lenders accepting loans through the Ellie Mae Network went out of business or stopped funding loans through their wholesale channel for mortgage brokers between March 2007 and August 2009," the prospectus notes.
The potential pool for Ellie Mae's Encompass software dropped 47% from approximately 495,000 at the end of 2006 to about 260,000 at the end of 2010, the firm said.
On top of that, mortgage lending volume is expected to be lower in 2011 and 2012 than it was in 2010 while experts have predicted that the current historically low mortgage interest rates will rise.
"The expected lower levels in residential mortgage loan volume in 2011 and 2012 as compared to 2010 levels will require us to increase our revenues per loan effected through the Ellie Mae Network in order to maintain our financial performance," the company said in describing risk factors of the IPO.
Besides its Encompass software, Ellie Mae offers a variety of other services. Lenders and others who use its network pay the firm "network transaction" fees. The firm also generates revenue from the sale of its software and related services.
Ellie Mae had net income of $777,000 in 2010, down from $1.66 million in 2009, according to consolidated financial data filed with the Securities and Exchange Commission
. In 2008, the height of the financial crisis, the firm reported a net loss of $1.06 million. Revenue was $43 million in 2010, up from $37.7 million a year ago. Revenue in 2008, during the height of the financial crisis, was $33.6 million.
Underwriters for the IPO are Barclays Capital
, William Blair & Co.
, Piper Jaffray & Co.
and Morgan Keegan & Co.
Write to Kerry Curry
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