By Anirban Sen and Joshua Franklin
(Reuters) - Shares of Rocket Cos Inc <RKT.N> rose 15% following their New York Stock Exchange debut on Thursday, a day after the parent company of U.S. mortgage lender Quicken Loans slashed the targeted size of its initial public offering by over $1 billion (760 million pounds).
Rocket shares were trading up at $20.51 as of 2:43 p.m. Eastern Time (1843 GMT) after they opened flat at $18 a share, the same as its IPO price.
Rocket's relatively lukewarm flotation comes at a time when U.S. capital markets are in the middle of a stellar recovery after the COVID-19 pandemic put several debuts on hold.
The IPO pricing and deal size suggested investors were not fully convinced that Rocket's mortgage platform business deserved the rich valuation of other Silicon Valley tech unicorns.
In the IPO, Rocket, which is profitable, prioritized selling shares to investors more likely to hold the stock for the longer term, Chief Executive Jay Farner said.
"Raising capital is not the primary concern. The primary concern for us was taking the company public so we have another strategic lever to pull in the future," Farner said in an interview.
Rocket sold 100 million shares, down from 150 million it had planned for the IPO, to raise $1.8 billion, which valued the company at around $36 billion.
It was the third-largest U.S. listing of 2020, excluding blank-check companies. Only Royalty Pharma <RPRX.O> and Warner Music Group <WMG.O> have had bigger stock market debuts this year.
"You're seeing a low-rate environment in conjunction with decreased (mortgage) applications," said Michael Underhill, chief investment officer for Capital Innovations, which invests in IPOs.
"So, investors are being very cautious, very surgical and ... if it's not a rock-solid business model, they're not really interested in buying at the IPO."
Rocket, founded by billionaire Dan Gilbert in 1985, said earlier this month it expects a profit of more than $3 billion in the second quarter, compared with a loss last year.
(Reporting by Anirban Sen in Bengaluru and Joshua Franklin in Boston; Editing by Shinjini Ganguli, Shounak Dasgupta and David Gregorio)