What Happened?
Shares of fintech mortgage provider Rocket Companies (NYSE: RKT) jumped 6% in the afternoon session after positive momentum continued as stockholders approved the company's $9.4 billion all-stock merger with Mr. Cooper Group Inc.
The merger approval is a significant step forward, with Mr. Cooper investors set to receive 11 shares of Rocket Class A common stock for each of their own. This deal will allow Rocket to integrate Mr. Cooper's servicing platform into its operations.
Separately, the positive market mood was bolstered by economic data suggesting a potential decrease in interest rates, which would be beneficial for a mortgage lender like Rocket by making borrowing more affordable. The optimism is also supported by the company's recent performance, having beaten Wall Street expectations in the second quarter and provided strong revenue guidance for the third quarter.
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What Is The Market Telling Us
Rocket Companies’s shares are extremely volatile and have had 38 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 3.2% on continued positive momentum following major progress on its pending acquisition of Mr. Cooper Group. The stock is building on gains from the previous session after Mr. Cooper shareholders voted to approve the merger. Further boosting investor confidence, Rocket extended tender offers related to the acquisition, noting very high participation rates (88% to over 98%) from noteholders. This strong support signals confidence in the transaction and helps smooth the debt restructuring process required for the deal. As a result of the rally, Rocket's shares have now crossed above the average 12-month analyst price target of $17.55, which could prompt analysts to re-evaluate their ratings and potentially raise their targets.
Rocket Companies is up 87.1% since the beginning of the year, and at $20.30 per share, it is trading close to its 52-week high of $20.67 from September 2024. Investors who bought $1,000 worth of Rocket Companies’s shares 5 years ago would now be looking at an investment worth $892.48.
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