Home Point IPO size cut likely connected to GameStop market turmoil

The ongoing market turbulence tied to GameStop and other stocks favored by Redditors may have played a role in the large cut in both the size and expected price in Home Point Capital's initial public offering.

After the market closed on Jan. 28, Home Point priced an offering of 7.25 million shares (along with an underwriters' option of 1.0875 million shares) at $13 per share, a far cry from the 12.5 million shares (plus 1.875 million share underwriters' option) and $19 to $21 range it anticipated.

But after the stock started trading, the price fell to a low of $9.05 per share. It has since rebounded and was at $10.58 at noon.

While this makes it three for three of recent nonbank mortgage company IPOs to reduce their size, Home Point's cut is much larger than the difference seen in both Rocket Cos. and Guild Holdings.

United Wholesale Mortgage went public via a merger on Jan. 22 with a special purpose acquisition company and thus assumed the price that Gores Holdings IV was trading at prior to the deal's completion.

Home Point, unlike its predecessors, did its IPO at the end of a week where retail investors, largely spurred on by a Reddit group, pushed GameStop's stock to astronomical highs, confounding institutional investors who had shorted that stock. Among the other stocks reportedly involved in the short squeeze are mall owning real estate investment trusts Macerich and Tanger Factory Outlets.

If Home Point’s underwriters' option is exercised, gross proceeds to the company's selling shareholders — primarily affiliates of Stone Point Capital — will be $108.4 million rather than the expected $301 million.

"We felt it was very important for us and, really, for the mortgage industry, that Homepoint [the branding the mortgage subsidiary uses] take this first step to go public," Maria Fregosi, the company's chief investment officer, said in a statement. "We wanted to make sure that we had a successful offering, so we adjusted the offering size to a level that made sense and allowed us to achieve our main goal of getting into the public market."

When Rocket Cos. went public, it ended up offering 100 million shares at $18, down from 150 million shares in a $20 to $22 range. Guild's IPO was ultimately priced at $15 per share for 6.5 million shares rather than between $17 and $19 for 8.5 million shares.

Warming up in the bullpen is loanDepot, which on Jan. 27 updated its registration statement for an offering of 15 million shares plus underwriters' option of 5.59 million shares, with an anticipated price ranging between $19 and $21.

In addition, both AmeriHome and Caliber Home Loans, which put their respective IPOs on hold prior to pricing due to market conditions, updated their respective registration statements during January, indicating they each plan to proceed on going public at some point. But neither update included an expected number of shares to be offered and a price range.