Another home equity lender is climbing on the initial public offering bandwagon.
IMC Mortgage Co., Tampa, has filed for an offering with the Securities and Exchange Commission. Other finance companies that have made such offerings in the last year include Contifinancial in New York and Cityscape, Elmsford, N.Y.
One stock analyst said the offerings were a result of what he calls "the Money Store effect." The analyst, Gary Gordon of PaineWebber Inc., New York, said the high stock price for Money Store Inc., Union, N.J., had motivated similar companies to go public.
According to Mr. Gordon, finance company executives are saying, "Others are doing so well, the stock market seems to like them, so why don't we go public?"
Money Store's stock price doubled earlier this year before settling back from recent highs. Cityscape's stock has also doubled, and Contifinancial has risen more than 25% since its offering.
IMC, formerly known as Industry Mortgage Corp., was started in August 1993. It began as a partnership of several lenders, including Champion Mortgage Co., Parsippany, N.J.; Cityscape, and the Money Store. It makes home equity loans to borrowers with less-than-perfect credit, known as "B," "C," and "D" credits, through brokers and correspondent lenders, including the partners.
While the company currently does little business directly with consumers, its IPO filing said the lender is seeking to expand that business through advertising, direct mail, and telemarketing. Retail lending is more costly than wholesale purchases, but profit margins are greater.
Home equity lenders currently have access to inexpensive funding through securitization, while profits gained through origination have stayed the same, Mr. Gordon said. This has made the business increasingly profitable, he said. But he warned that it would become less so as more companies enter the business and price competition squeezes profit margins.
In 1995, IMC bought or originated $621.6 million of home equity and subprime loans. In 1994, the company originated or bought $282.9 million, and the company's 1993 volume was $29.6 million. It securitizes and sells the loans it originates or buys.
Separately, Imperial Credit Mortgage Holdings Inc., Santa Ana Heights, Calif., said it was planning a public offering of up to 2.5 million common shares.
In a press release, the company said it plans to use the proceeds for long-term investment, conduit operations, warehouse lending, and general corporate purposes.
Imperial said it plans to make the offering in 30 to 60 days. The company is affiliated with Imperial Credit Industries.
