IMX Exchange Inc. hopes to raise $57.5 million in an initial public offering of common stock intended to help it soup up its online wholesale mortgage marketplace.
The San Ramon, Calif.-based company has not set a date for the IPO, which is being underwritten by Deutsche Bank Securities Inc., J.P. Morgan Securities Inc., SG Cowen Securities Corp., and E Offering Corp.
The IPO plan was announced last week. On Monday, IMX identified the companies that invested in the five-year-old outfit through a $15.7 million sale of preferred stock that brought its financing to $55 million. They are the Dutch banking giant ABN Amro, Hummer Winblad Venture Partners, Mohr Davidow Ventures, Technology Crossover Ventures, Intel Corp., Lehman Brothers, Citigroup Inc., BancBoston Capital Inc., and Presidio Venture Partners.
IMX is one of a new breed of Internet companies seeking to capitalize on the lucrative market for broker-originated loans. The company lets brokers, who traditionally deal with only a few lenders, find more loan options and better prices by connecting with more lenders.
The mechanism IMX uses is an online "exchange" through which a large network of lenders can bid on individual loans listed by mortgage brokers. Theoretically, borrowers benefit by getting loans at the best possible interest rate, while lenders and brokers stand to gain through a streamlining of the mortgage origination process and more liquidity. IMX charges lenders lower fees than a wholesale account representative would normally charge.
IMX recently completed deals with origination software makers Calyx Software of San Jose, Calif., Byte Enterprises of Seattle, and Contour Software of Campbell, Calif., that it says link it to 70% of the nation's mortgage brokers.
With those deals IMX expects to increase its loan volume from $5 billion, or 1% of the market, to $450 billion a year, or 70%, in the next 12 to 36 months.
The company, which was started in 1995 and opened its exchange in 1997, lost $13.2 million last year. And analysts said the exchange model may have some drawbacks.
Kenneth Posner, an analyst at Morgan Stanley Dean Witter, said in a recent study that he believes that brokers' exposure to new lenders could lead to confusion. He said that exchanges' transaction fees may not be nearly as lucrative as the closing of loans, which is done by brokers.
Mr. Posner says it is too early to say which system will succeed, but said the subprime market as an area where systems like that of IMX could do well. "These exchanges could be particularly useful for niche products, like subprime, Alt-A, and adjustable-rate mortgages, where pricing varies more widely than it does for prime fixed-rate mortgages," he said.
IMX added four subprime lenders to its network last week: New Century Mortgage Corp., Ameriquest, BNC Mortgage, and Finance America (formerly Amresco).