FileToto: A banner that celebrates Rocket Companies Inc., the parent company of US mortgage Loans, IPO can be seen on the front facade of the New York Stock Exchange in New York City, August 6, 2020.
Brendan McDermid | Reuters
Company: Rocket Companies Inc (RKT)
Business: Rocket company is a financial technology company that consists of mortgage, real estate and personal financial companies. The segments include direct-to-consumers and partner network. In the Direct-to-Consumer segment, customers can interact both online with Rocket Mortgage and with the company's mortgage bankers. Rocket markets various branded campaigns and performance marketing channels to customers via the direct-to-consumer segment. It also includes title insurance, reviews and comparison services. The partner network segment uses its customer service and brands to expand marketing and influencer relationships as well as its mortgage broker partnerships by Rocket Pro third-party Origination (TPO). The brands for the company's personal financial and consumer technology include missile mortgages, Rocket Homes, Amrock, Raketengeld, rocket loans, Rocket Mortgage Canada, Ledesk, Core Digital Media and Rocket Connections.
Market value: USD 25.4 billion (USD 12.68 per share)
Stock Diagram -iconstock -Igram -Symbol
Rocket company in 2025
Activist: Valuaact Capital
Property: 9.99%
Average costs: $ 12.37
Activist comment: Valuact has been a leading investor at corporate governance for over 20 years. Valueact school director generally have half of the core positions of Valueact and had 56 seats from the public company for over 23 years. In addition, the company is a long -term, thoughtful and hardworking investor who is known to create value behind the scenes. Valuact has previously started 106 activist campaigns and achieves an average return of 52.60% compared to 21.27% for Russell 2000.
What happens
Valuact has taken a position in rocket companies (RKT).
Behind the scenes
Rocket Companies is a financial technology company that consists of mortgage, real estate and personal financial companies. Rocket has won market shares in a strongly fragmented industry and is now number 1 of mortgages in the USA. This position was primarily driven by a technology first-line line approach for mortgage processing. In contrast to industries -legacy methods in which people and technologies are stretched out over the entire process, Rocket has divided the workflow into different phases and engaged people and technologies with every step. As a result, the company can come a loan with around a third of the costs of colleagues and loans over an average of 21 days compared to 45 days for its competitors. However, the company's share price has not yet reflected this clear competitive advantage, since the shares have decreased by over 29% since the first public offer in August 2020.
While Rocket is a great company, it is not a great stock. The main reasons for this are the small swimmer, the controlled property and the unnecessarily confused stock class structure. The founder of Rocket, Dan Gilbert, retains over 80% of the election power by a preferred stock class. The company's current public swimmer only accounts for about 7% of the total tuning power. Other aggravating matters are that Rockets owners were distributed in four different stock classes – although the company would reduce its stock classes to two in March. These factors make it difficult to buy the share, so that the investor base did not exist for many long institutional investors, which are usually applied for by companies of this size and stature. The resulting evaluation gap is clear, while rockets for a single number of digits act in more than 20 times the comparable company such as Schwab.
However, the Float problem is to be remedied. Rocket's public float will increase from 7% to 35% due to the pending acquisitions of Redfin and Mr. Cooper. In addition, the company will collapse its stock structure of four to two. This still leaves a controlled company in which Dan Gilbert has about 65%, but controlled companies have not frightened the added value. On the contrary, the company has achieved strong returns in many controlled companies such as Liberty Live Group, Meta platforms, Martha Stewart Living, the New York Times, the 21st Century Fox, Spotify and KKR. In these situations, Valueact has achieved an average return of 96.15% compared to 21.12% for the corresponding benchmark. While the significantly increased float and the simpler capital structure should attract the wider basis of long -term institutional investors who are so far lower, this is only a tailwind for shareholders, not a value solver. Falling interest rates are also a tailwind for rocket because it accelerates the refinancing of the mortgages.
However, the real value creator is that Rocket continues its technological leadership, which could be severely accelerated with the help of artificial intelligence. There are two types of AI benefits -the technology -enbler (such as Nvidia, Amazon and Salesforce) and corporate class companies with business models that can be fundamentally improved by AI integration. As a market and technological market leader in a strongly fragmented industry, Rocket is well positioned to cope with its already first-class mortgage-line process by integrating AI in order to further expand operational efficiency, profitability and current price and timeline advantages compared to the peers. Traditional banks should also be easier to use AI to close the gap because they have far more improvement than rocket. However, AI is quickly adopted by companies such as Rocket – companies that were located for technology and the digital age – in contrast to older institutions that have historically reluctant to use technological innovations. During the entire AI revolution we have observed in other consumer-based industries that those already technically born (e.g. Rocket has a relatively new CEO that wants to dominate the mortgage industry and has no fear of technology, previously worked on intuit, PayPal, Groupon and Microsoft. If this value lever is carried out properly, Rockets should be assumed in a compartment Most of the mortgage market to grow to 15% to 20% and possibly higher if they are connected to some acckritine mergers and acquisitions. Victory.
This is not a value that takes a “flyer” on AI. First, Valueact is a very thoughtful and hardworking investor and does not take any “flyers”. Second, Valueact has extensive experience from both sides of the AI. The company was in companies in companies such as Microsoft and Salesforce, two of AI's largest developers. And Valuact was active shareholders of companies such as Spotify, the New York Times, Expedia and Recruit (TECE.com) – some of the greatest users and favored AI. If Valueact invests in AI, it's not just spitballing. Rather, the company understands Ki thoroughly and how its customers can use them. Valuact makes such investments because the company likes it for all the reasons mentioned above. The company takes over the board seats in approximately half of its core positions, but does not go into an investment that “needs a board seat” or even wishes a board seat. In addition, this is very low as an investment of 200 million US dollars for Valuact. But with increasing float and its position grows -and if the management gets to know the company better -we think with the financial expertise and the AI ​​experience of Valueact that the company is invited to Rocket's Board.
Ken Squire is the founder and president of 13D monitor, an institutional research service for shareholders, and the founder and portfolio manager of the 13D Activist Fund, an investment fund that invests in an activist 13D investment.