LoanDepot to IPO this week at possible $6.2B valuation

Data-driven mortgage lender hopes to raise $300M in public offering

After pushing back its initial public offering a week, loanDepot looks poised to tap the public markets at a $6.2 billion valuation later this week.

The multi-channel mortgage lender hopes to raise $300 million by pricing its shares between $19 and $21. If all goes according to plan, loanDepot would command a valuation of $6.2 billion.

Though $6.2 billion is a healthy number, it’s a far cry from the figure loanDepot floated when it first made noise about an IPO in the fall. At the time, loanDepot was seeking a valuation of between $12 billion and $15 billion, Bloomberg previously reported.

Its founder and CEO Anthony Hsieh in September even compared loanDepot to Rocket Companies, which went public in August at a market cap of roughly $36 billion.

”We are the Lyft to their Uber,” Hsieh said. “The momentum for non-bank lending is here to stay. We’re here to fuel the American dream.”

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According to figures from Inside Mortgage Finance, California-based loanDepot originated about $100 billion worth of residential mortgages in 2020. That production made loanDepot the seventh-largest lender in America last year.

The company generated $1.47 billion in net income in the nine months through September 30, blowing away any prior record many times over.

“We’ve created a company that is built to serve customers throughout the entire loan transaction, from the onset of the purchase or refinance decision through loan closing and servicing,” Hsieh said in the prospectus.

“We now possess roughly 3% market share of annual mortgage origination volumes, which makes up part of the $11T total addressable market. Thanks to our brand investment over time, we are also one of the most recognized brands in the industry today. All of this gives us enormous runway. And, to some, it may seem like we are in a much different place than we were 11 years ago. But, from my vantage point, much feels the same.”

LoanDepot, backed by private equity firm Parthenon Capital Partners, first announced plans to go public in September 2015, but canceled the IPO hours before pricing due to what the company called adverse “market conditions.” At the time, LoanDepot had sought a valuation of $2.4 billion to $2.6 billion. In 2017, the company revived plans for an IPO but didn’t take the plunge.

Its foray into the public markets follows that of several rivals, including the aforementioned Rocket Companies as well as wholesale-only lenders United Wholesale Mortgage and Homepoint.

“While the company is fast growing and profitable, [loanDepot] operates in a highly cyclical industry, and recent IPOs of mortgage lenders have had lackluster receptions,” Renaissance Capital said of loanDepot.

In terms of channel mix, loanDepot most closely resembles Rocket. In its S-1, loanDepot touts its entrepreneurial ethos and its technology platform, called “mello.” And like Rocket, loanDepot has spent over $1.2 billion in marketing and promotion of its brand.

In its prospectus, loanDepot talks at length about its partner business, which includes third-party-originations via mortgage brokers and real estate agents, as well as joint-ventures with builders and other referral partners. But it concedes that its retail strategy is more fully baked. LoanDepot originated 72% of the company’s loans in 2019 via its 2,000-member strong retail channel, and 28% through its partner network.

“We are a data-driven company. We utilize data from lead acquisition, digital marketing, in-market relationships, and our servicing portfolio to identify and acquire new customers and retain our existing customers,” the firm said in its S-1.

“During the last 12 months, we have analyzed, enriched, and optimized more than 9 million customer leads with a deep understanding of each potential customer’s financial profile and needs. We also maintain mello DataMart, an extensive proprietary data warehouse of over 38 million contacts generated over our ten-year history. Our predictive analytics, machine learning and artificial intelligence drive optimized lead performance,” the S-1 stated.

The data-driven approach has led to big direct-to-consumer conversions, the company said in its prospectus.

“We have nearly doubled our consumer direct conversion rates year-over-year for the nine months ended September 30, 2020 and our customer acquisition cost declined by 52% to $767 for the three months ended September 30, 2020 from $1,585 for the year ended December 31, 2017. Additionally, our customer acquisition cost declined by 33% to $890 for the nine months ended September 30, 2020 from $1,323 for the nine months ended September 30, 2019.”

LoanDepot, which now has over 10,000 employees, could begin trading on Thursday on the New York Stock Exchange under the ticker symbol “LDI,” according to Renaissance Capital.

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