LoanDepot Weighs Reviving IPO After Pulled 2015 Sale

Updated on
  • Plans to revisit a public stock offering are in early stages
  • Company targeted valuation of as much as $2.6 billion in 2015

LoanDepot Inc., the fast-growing mortgage lender that aborted plans for an initial public offering in 2015 just hours before pricing, is exploring the possibility of reviving a stock offering, according to a person with knowledge of the matter.

The planning is in the early stages and the company isn’t ready to lay out a time frame for any IPO filing, said the person, who asked not to be identified because the talks are private.

Julie Reynolds, a spokeswoman for Foothill Ranch, California-based LoanDepot, declined to comment on an IPO plan.

In 2015, the company had targeted a market value of $2.4 billion to $2.6 billion at the IPO based on the $16 to $18 marketed share price range with 147 million shares outstanding after the offering.

LoanDepot’s previous attempt to go public didn’t go smoothly. The company initially filed to sell shares in October 2015. It changed chief financial officers within three weeks in an unusual move for a company seeking a stock offering, and the first in a string of events that led to the deal being pulled.

Aborted IPO

On Nov. 12, the day that LoanDepot expected to price its IPO, a person familiar with the offering said that the deal was at risk of pricing below its offer range. Chief Executive Officer and founder Anthony Hsieh withdrew the deal from the market that same evening.

Several days later, Hsieh cited weak market conditions and said he aborted the IPO, in part, after watching valuations fall for other fintech lenders, specifically naming LendingClub Corp., a competing lender that had extended trading losses for three days running up to the LoanDepot listing. LendingClub had just raised $1 billion in its stock sale the year before. Hsieh didn’t rule out another IPO attempt in the future.

LoanDepot has sought to grow bigger since pulling the offering, and has worked to develop newer products, including unsecured personal loans, a venture that has produced some disappointments. Ellington Financial, an initial investor in the loans, stopped buying them after their performance fell below expectations and attempts to correct the weakness failed, a person familiar told Bloomberg in February.

‘Cool Again’

The mortgage company has also worked to implement new technologies that it says will give it a leg up on traditional home lenders. It recently launched a new digital lending platform, part of an $80 million investment in technology over the last 18 months. The platform, which provides a fully digitized mortgage loan application, is designed to make loanmaking processes more efficient and cheaper for consumers, according to a press release.

“We have to make mortgages cool again,” Hsieh said this month at a housing conference hosted by Goldman Sachs Group Inc. in New York. He said that innovation in mortgage lending is critically important, and that lenders are trying to “reset” their image after being tarnished by the last financial crisis.

Talk of reviving an IPO and potentially growing the company and looking for acquisitions comes at a tough time for a lot of home lending businesses in America.

If interest rates rise as investors expect, fewer borrowers will have reason to refinance their existing home loans, a business that has helped fuel industry profits over the past eight years. Government-backed housing companies like the Federal Housing Administration dominate the market for riskier, low-down payment new mortgages, cutting into historically big profits for private lenders and banks, for example.

Fragmented Market

Well-established lenders, such as Impac Mortgage Holdings, expect consolidation within the mortgage market to pick up this year. That company, a specialist in non-prime lending, is currently closing an acquisition, executives there said last month.

Hsieh was previously president of and founder of two other Internet mortgage companies. LoanDepot began making loans in early 2010, and with backing from private-equity firm Parthenon Capital Inc. “Our goal is to be the market leader,” Hsieh said in a 2010 interview with Bloomberg.

At the Goldman Sachs event this month, Hsieh said that LoanDepot has become an industry leader, and that it wants to be bigger.

“Forty percent of the mortgage market is fragmented, and doesn’t have the budget or interest in acquiring technology or building the technology needed to move forward in the modern home lending business,” Hsieh said. That is creating opportunities for existing mortgage companies that are big enough, such as LoanDepot, he said.

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