Black Knight Financial Services Inc., the mortgage-technology company backed by private-equity firm Thomas H. Lee Partners, gained in its trading debut after raising $441 million in an initial public offering.
The shares jumped 7% to $26.25 as of 9:52 a.m. in New York trading Wednesday, after the company priced the IPO at $24.50 apiece.
Black Knight, the largest mortgage software firm, sells access to cloud platforms that handle every part of loan-making within a network that includes brokers, appraisers, insurers and credit companies. The company, a division of title insurer Fidelity National Financial Inc., also sells access to mortgage servicing platforms used by more than half all companies that collect payments and process foreclosures.
The mortgage market is entering recovery mode, said Ross MacMillan of RBC Capital Markets ahead of Wednesday's debut. While that will drive Black Knight earnings as lenders for the company's application-processing platforms, the jump won't be enough to make it easy, he said.
"We've bounced off the bottom, but there is not a super-bullish outlook for lending this year," MacMillan said. "It all comes down to the health of the mortgage market, which will depend on the health of the housing market."
Mortgage lending probably will rise 14% this year to $1.3 trillion as a tight labor market fuels wage growth, the Mortgage Bankers Association said in a May 18 forecast. It put 2015 at the second-lowest level in more than a decade, according to Bloomberg compilations of MBA data.
Jacksonville, Fla.-based Black Knight had net earnings of $14.5 million in the three months ended March 31 on revenue of $227.2 million. In 2014, the company had a net loss of $107.1 million for the full year.
Fidelity National is the largest provider of title insurance, in which companies use their records and public documents to verify a seller is a property's true owner and that it's free from liens. The company would retain voting control over Black Knight after the IPO through its ownership of Class B stock, the offering prospectus shows.
JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. managed the offering. Black Knight is listed on the New York Stock Exchange under the ticker BKFS.
