As far as finance-sector IPOs are concerned, this month all eyes will be on mobile-payments facilitator Square when it makes its market debut next week. But it won't be the only new finance stock in town -- independent lender loanDepot is slated to IPO this Friday.
In fact, loanDepot's issue is (at the moment, anyway) set to be larger than Square's, at roughly $510 million compared to $324 million. loanDepot also has a pack of heavyweight banks behind its IPO, including Wells Fargo (NYSE:WFC) Securities and Citigroup (NYSE:C).
So loanDepot's IPO is, literally, a big deal. Here's a glance at the company and the key details of the issue.
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As its name and oddball capitalization suggest, loanDepot is a consumer lender with a heavy presence online. In its IPO prospectus, the company says it is the No. 2 direct-to-consumer non-bank lender in the country when gauged by annual funded loan amount. It operates under its eponymous brand name, plus the imortgage, Mortgage Master, and LDWholesale brands.
loanDepot aims to leverage its considerable technology to make its processes more efficient than those of more traditional lenders. Still, despite that pronounced tech slant, it has over 150 physical branch offices throughout the U.S.
It's a busy company experiencing a growth spurt. In the trailing 12-month period ending July 30, it originated just over $22 billion in loans -- 125% higher on a year-over-year basis.
Recent fundamentals have also been growing briskly. Net revenue for the first half of this year was nearly $490 million -- more than double the $244 million of the same period of 2014. Net profit, meanwhile, came in almost seven times higher at $69 million.
American consumers simply love to borrow money. According to loanDepot, this country had nearly $12 trillion in household debt outstanding as of June 30.
The company says its target segment -- consumer debt excluding auto and student loans -- was $1.6 trillion lower than at the peak of last decade's financial crisis. That spells opportunity in the consumer debt market, and loanDepot argues that it is well poised to take advantage of it, as its lean-and-mean business model can compete against more traditional lenders -- like its backers Wells Fargo and Citigroup.
loanDepot characterizes these entities as being "burdened by high fixed costs and antiquated processes, in part due to extensive legacy infrastructure and labor-intensive processes." It also believes these difficulties have been exacerbated by a comparatively strict regulatory environment.
The company might be overly bullish about the amount of fresh credit Americans are hungry for -- not to mention the competitive advantages it has -- but there's no doubt that consumer lending here is a big, ripe market. There is plenty of business to go around, and a lender that can shovel cash to borrowers in a more efficient way than its big rivals has obvious appeal.
So this is an ambitious, profitable company operating in a robust corner of the economy. As such, it makes an intriguing investment.
loanDepot is scheduled to hit the market on Friday. 30 million shares are to be sold at $16 to $18 apiece, and the stock will be listed on the New York Stock Exchange under the ticker symbol LDI.
The list of lead underwriters for the issue is long -- and, ironically, reads like a who's who of traditional financial companies. In addition to the aforementioned Wells Fargo Securities and Citigroup, it includes Morgan Stanley, Goldman Sachs, UBS Investment Bank, and Barclays.
Eric Volkman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Wells Fargo. The Motley Fool has the following options: short January 2016 $52 puts on Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.