Blend Labs' initial public offering could raise as much as $440 million in gross proceeds if the stock sells at the upper end of its $18 to $20 range.
The company wants to sell 20 million shares of its Class A stock. Blend also has a 3 million share underwriters' option. Less than 10% of the total Class A stock will be outstanding after the IPO of approximately 208.7 million shares. The prospectus estimates the IPO will deliver net proceeds of $309.5 million at $17 per share. That amount rises to $357 million if the underwriters' option is exercised.
Blend, a mortgage industry technology provider used by major banks, is set to launch its offering in a market that recently has proved challenging for nondepository lenders’ IPOs. Every mortgage company that has launched one recently has cut both the number and dollar amount of shares. Examples include Rocket Cos.’ launch last August and the June 17 listing of Angel Oak Mortgage. Several other nonbank lenders, including AmeriHome, Caliber and mortgage insurer Enact Holdings, have postponed their IPOs, citing market conditions.
The mortgage technology firm’s offering preserves co-founder's Nima Ghamsari's control of the company. Ghamsari will be the sole holder of over 10.9 million Class B shares that give him 77% voting power.
In addition, Ghamsari gets an option to purchase 26.1 million shares of Class A common stock at $8.58 per share. Those shares vest "upon the satisfaction of a liquidity event-related performance condition, a service condition, and/or a performance-based market condition," according to the company’s updated prospectus.
Blend's prospectus also allows for the creation of Class C common stock, but it does not plan to issue any as part of the IPO.
Proceeds from the IPO would be used for general corporate purposes, including working capital, operating expenses and capital expenditures. The money also could be used to repay debt, make acquisitions or invest in other businesses. Other than the Title365 deal that closed at the end of the second quarter, the prospectus lists no other material transactions that could affect the company’s value.
Title365 had net income of $16.97 million in the first quarter. On a pro forma basis, taking account of acquisition and financing transaction adjustments — but not IPO costs — the Blend/Title365 combo would have lost $17.7 million in the first quarter. That marks an improvement on the $27.1 million the company lost as a standalone entity. Including the IPO adjustments, the loss would be $22.7 million.
For the full year 2020, Title365 made $36 million. Blend's loss would have been reduced to $47.8 million on a pro forma basis from the reported $74.6 million if it owned Title365 at the time.
