Direct mortgage lender and servicer AmeriHome's IPO plans are back on track. The company, owned by asset management firm Apollo Global (NYSE: APO), initially planned to go public in late October -- even setting an anticipated IPO date and price range -- but ultimately decided to delay its public debut.
In early January, AmeriHome filed an updated version of its IPO paperwork (known as an S-1) with the Securities and Exchange Commission (SEC), so it looks like the company might finally be ready. Here's a rundown of what AmeriHome does, what we do and don't yet know about the company and its IPO plans, and what investors should keep in mind as the IPO approaches.
What we know so far, and what we don't
AmeriHome is a direct mortgage lender and is also a major loan servicer. In the 12-month period ending September 2020, the company originated $58 billion in loans. Of this, $24.5 billion consisted of purchase mortgages, with refinancing loans making up the rest. To be sure, with the wave of refinancing we saw in 2020, it's not fair to judge a mortgage lender by its recent growth, but AmeriHome has grown at a 27% annualized rate since 2015.
On the servicing side of the business, AmeriHome services mortgages for 429,000 borrowers, with total unpaid principal of $96 billion. This has grown by approximately 400% since the end of 2015 and continues to expand rapidly.
The company's net income over the last 12 months was $367 million, and this figure has grown at an astonishing 76% annualized pace over the past five years. So, there's quite a bit of momentum in the business as it heads toward its public debut.
To say that there's still plenty of growth potential would be a major understatement. A $96 billion servicing portfolio may sound huge (and it is), but there was about $10.7 trillion of residential mortgage debt at the end of 2019. So, AmeriHome doesn't even have a 1% market share yet. On the originations side of the business, $58 billion in origination volume makes up about 2.6% of 2019 mortgage production in the U.S.
There's also quite a bit of information we don't know yet. For starters, we don't know the timing of the IPO. As mentioned, AmeriHome first filed its IPO paperwork back in October but put its plans on pause. The latest version of its S-1 was filed on Jan. 4, but there's no timetable for the IPO to actually take place.
We also don't know the stock's price or the company's valuation. In October, the company had stated a price range of $16 to $18 per share, but that's left blank on the latest version of the filing.
Should AmeriHome be on your radar?
AmeriHome is certainly an interesting mortgage company, and I'm an especially big fan of the large servicing rights portfolio that should produce steady income, even if the real estate market suddenly turns cold.
However, it's important to emphasize that IPO investing isn't for everyone, and that's especially true in recent months. It isn't uncommon for IPO stocks to double (or more) by the time they're actually available for public trading -- and to then remain volatile for weeks or months after.
The bottom line is that for risk-tolerant investors, AmeriHome could be a good stock to keep on your radar. Just expect a bit of a roller coaster ride once it actually starts trading.