The individual investors who drove GameStop Corp’s
meteoric rise has a new target: Rocket RKT -18.87%
Cos., The parent company of Quicken Loans.
Shares of the mortgage lender rose 71% Tuesday to $ 41.60 and nearly 377 million shares traded, more than a ten-fold increase over the previous day. Its trading was halted several times on Tuesday afternoon due to its volatility. Rocket shares fell 16% early Wednesday.
Like GameStop, Rocket is very short-circuited. According to S3 Partners, a data analytics firm, 46% of its shares are available for trading as of Monday. Small investors on WallStreetBets, the Reddit community that gave birth to GameStop, have been urging each other over the past few days to buy the stock and share evidence of their own huge profits.
Rocket has other respects. The company recently announced that it will pay a one-time dividend of $ 1.11 per share later this month, citing its ‘very profitable and capital-light business model’.
Rising mortgage rates also increase the earning potential for mortgage lenders just as the important spring home sale season begins. The average interest rate on the 30-year fixed-rate mortgage has recently risen to 2.97%, the highest level since August.
According to Detroit, Rocket is the largest mortgage lender in the US, according to research firm Inside Mortgage Finance. Its $ 323 billion home loan in 2020 raised the $ 221 billion raised by its closest rival, Wells Fargo & Co. originated, easily surpassed. Its large scope and strong brand – it ran two Super Bowl ads – set it apart from other non-bank lenders.
Before the explosion of Rocket, shares of non-banking providers did little to impress investors in recent months. Some of the lenders that have listed their shares on the public market in recent months have significantly reduced their offer. Some have never reached the market due to a lukewarm investor interest.
Shares of Rocket have not strayed too far from their $ 18 listing price in the seven months since the company’s listing. The stock rose to more than $ 31 in the first month, but quickly returned to almost $ 20.
The first sign of upheaval came late last week when Rocket reported impressive results in the fourth quarter. Shares rose nearly 10% on Friday. The news of a significant dividend has led to the initial rise in Rocket’s share price, says BW George analyst Bose George.
“The initial move made sense, but since then the principles have not driven it,” he said. George said. “These are other factors that make it harder for us to judge.”
Shortly before its debut on the public market last summer, Rocket announced an ambitious expansion target: 25% of the mortgage market in the next decade. Its market share currently stands at about a third of that, according to Inside Mortgage Finance.
“There may be ups and downs in margin and interest rate for a short period of time … but if we get to the other side of it, you think there are usually fewer competitors,” CEO Jay Farner said during the company’s earnings call. last week. “And so, for the rest, not only does the margin stabilize, but it also gives you the opportunity to increase market share.”
Mr. Farner will speak at a Morgan Stanley conference on Wednesday morning.
Two other mortgage lenders acquired major shares on Tuesday. UWM Holdings Corp.
and loanDepot Inc.,
increased by 20% and 13% respectively.
The GameStop frenzy has put the spotlight on a growing group of investors seeking and sharing trading information on social media platforms such as YouTube and TikTok. Three investors explain how these online communities help them chase the market. Photo illustration: Adam Falk / The Wall Street Journal
Write to Orla McCaffrey by [email protected]
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