2020 was a busy year for initial public offerings (IPOs), but the early indication is that 2021 could be even busier. This is especially true in the financial technology, or fintech, space as the ways we spend, save, and borrow money are transforming rapidly.
Mortgage lender loanDepot is among the latest to declare an intention to go public, as it has filed an initial registration statement with the Securities and Exchange Commission (SEC). And given the recent IPO success of lenders Rocket Companies (NYSE: RKT) and Upstart (NASDAQ: UPST), it isn't much of a surprise. With that in mind, here's a quick overview of what loanDepot does and what we know about the IPO so far.
What does loanDepot do?
loanDepot is one of the largest direct-to-consumer mortgage lenders in the United States. It offers home purchase and refinancing loans, and its mello smartloan platform aims to make the mortgage process far easier and more efficient than it is with traditional lenders. The company offers a full range of mortgage products, including FHA, VA, jumbo, and conforming mortgages.
Like most tech-focused lenders, loanDepot is set up to do most of its business online, although it does have a pretty extensive branch network. The company was founded 11 years ago by CEO Anthony Hsieh, a veteran of the lending industry who has founded several other successful companies in his career.
loanDepot's IPO: What we know so far
According to the company's registration statement, loanDepot has a 2.6% share of the U.S. mortgage origination market, up from 1.7% in 2015. In the 12-month period ending in September 2020, loanDepot originated more than $79 billion of loans, which was 116% more than it did in the year before. To be fair, the mortgage market was exceptionally strong in 2020 thanks to record-low interest rates, but this is still a very impressive growth rate. In addition, 72% of the company's loan volume comes from its retail (consumer-initiated) business, with the other 28% coming from partnerships with homebuilders, real estate agents, and other third parties.
While the company's recent filing tells us some valuable information about its business, it's also important to point out there's still quite a bit that we don't know. loanDepot has simply filed an initial registration statement that lets investors know its intention to go public. We do not know the exact timetable of when the IPO will take place, and we don't know anything about how much the stock would cost or the company's post-IPO valuation.
The Millionacres bottom line
This isn't the first time loanDepot has explored going public. The company initially planned an IPO in 2015 but decided that market conditions weren't favorable. Given the strong IPO market of the past several months and investors' appetite for fintech disruptors, it's not a surprise that management has decided to take another swing at a public offering.
The bottom line is that loanDepot's growth certainly looks impressive, and at $11 trillion in size (forecast to reach $12.2 trillion by the end of 2022), there's no shortage of opportunity for disruptive lenders to build market share.
Having said that, I can't confidently answer the question of whether loanDepot is a good investment until more details emerge -- especially when it comes to the company's valuation. Some of the more recent tech-oriented IPOs in the market are trading for nosebleed-level valuations, so it'll be interesting to see how this plays out for loanDepot.