/https://specials-images.forbesimg.com/imageserve/5f3ed60184f6a34c96f9ef85/0x0.jpg?cropX1=0&cropX2=3354&cropY1=30&cropY2=1916)
Dan Gilbert.
ASSOCIATED PRESS
Billionaire mortgage tycoon Dan Gilbert just got a whole lot richer. Rocket Companies stock jumped 11% on Thursday, one day after the Detroit-based mortgage lender majority owned by Gilbert announced the date of its first public earnings call (it’s scheduled for September 2). Two weeks after taking the company — formerly known as Quicken Loans — public, the $4.5 billion stock gain Thursday makes Gilbert, 58, now worth $49.6 billion, the 21st richest person in the world and the 15th richest in the U.S. That means he’s now wealthier than Alibaba cofounder Jack Ma, Nike’s Phil Knight and industrial magnate Charles Koch.
Elon Musk’s net worth also surged on Thursday, rising $4.6 billion as Tesla stock climbed ever higher. Musk is now worth $89.8 billion. The 11% jump in Rocket Companies’ stock price Thursday may also be tied to the company making an appearance on CNBC, where Mad Money host Jim Cramer talked up the stock to retail investors.
Gilbert ranked at No. 230 on Forbes’ World’s Billionaires list, published in April, far lower than the position he now holds on Forbes’ Real-Time Billionaires list. He owns 95% of Rocket Companies’ stock, which means that a small movement in the stock price can have an outsized impact on the value of his stake. The company’s filings with the Securities and Exchange Commission include a provision that ensures Gilbert will maintain control over 79% of the voting rights.
Earlier this month public markets valued Rocket Companies at an eye-popping $42.7 billion, sending Gilbert’s net worth skyrocketing from an estimated $7.5 billion before the IPO to $45.3 billion after markets closed on the first day of trading. Gilbert also sold nearly $1.8 billion (pretax) in stock through the listing. Rocket shares have climbed a further 11% since the IPO on August 6.
The early August IPO was the second time Gilbert took the company public since founding it in 1985, when it was called Rock Financial. The first time was in 1998, but it was acquired a year later by Intuit for $370 million and rebranded Quicken Loans. Gilbert bought it back in 2002 for a much lower $64 million to regain more control, with Intuit retaining a 12.5% stake. Nearly two decades later, it’s now the largest mortgage lender in the country, with $124 billion in new mortgages in the first half of 2020, ahead of giants such as Wells Fargo.
Rocket priced its IPO at $18 per share, after last-minute pushback from investors led the company to lower its previous target range of $20 to $22. While the firm, which has pioneered online mortgage lending, marketed itself as a fintech outfit in its initial filing with the SEC, investors were skeptical, citing the highly cyclical nature of the mortgage business. The company is only covered by one analyst at the moment, Jack Micenko at Susquehanna International, who initiated coverage at an $18 price target. (Shares closed Thursday at $23.79). In his initiation note, Micenko cited its “leading tech-based origination platform” but cast doubt on its status as a fintech, comparing it instead to more traditional nonbank lenders such as PennyMac and Mr. Cooper.
Fintechs have highly visible and largely stable revenues, as opposed to mortgage lenders, which are more susceptible to changes in interest rates and employment figures, says Micenko. Rocket Companies has become the largest mortgage lender in the U.S. on the back of a refinancing boom, driven by low interest rates during the Covid-19 pandemic. While Rocket is able to hedge interest rate volatility to some degree — it also makes money on collecting payments and servicing existing mortgages on behalf of other lenders, a revenue stream which tends to rise when new mortgages fall — its business is still not as sustainable as most fintechs, Micenko says.
“They spent a tremendous amount and they were one of the earlier adopters of technology,” says Micenko. “They’re good at what they do and they’ve gained market share, but they’re still at the mercy of the marketplace. It’s not a fintech, it’s a mortgage company.”