Rocket Companies Acquires Truebill for $1.275 Billion

Rocket Companies Acquires Truebill in $1.275 Billion Deal

This morning, Rocket Companies revealed its agreement to acquire Truebill for a sum of $1.275 billion, paid entirely in cash.

Details of the Acquisition

Rocket Companies is widely recognized as the parent company of Rocket Mortgage. Truebill, conversely, operates as a direct-to-consumer application focused on financial wellness.

The app assists users with subscription management, automated savings strategies, and budgeting tools.

Financial Implications for Truebill

The acquisition price represents a significant financial gain for Truebill’s investors. According to data from PitchBook, Truebill’s most recent private valuation stood at $530 million following its latest funding round.

This final investment totaled $45 million and was secured earlier in the year.

Return on Investment

Consequently, Truebill’s most recent investors are seeing a return exceeding double their initial investment. Earlier investors are also experiencing an even more substantial profit.

The deal is considered highly favorable for all stakeholders involved.

Analyzing the Truebill Acquisition

Considering Truebill’s sale price of just under $1.3 billion, estimating the startup’s annual recurring revenue (ARR) becomes a key exercise. What figure represents a reasonable projection for the company’s yearly revenue?

A prediction around $50 million would align with many initial assessments. Valuations in the tech sector remain elevated, even with recent adjustments, and the fintech industry is currently experiencing significant interest.

However, that estimate proves inaccurate. Here’s the information from Rocket:

This is a surprising revelation.

Truebill is projected to conclude the year with approximately twice the ARR initially anticipated. Furthermore, the company is experiencing year-over-year growth, effectively doubling in size. This growth trajectory is highly desirable for companies considering an initial public offering (IPO). Yet, instead of pursuing an IPO, Truebill has been acquired for less than 13 times its current ARR.

This valuation appears quite low, in fact.

The all-cash nature of the deal may have resulted in a discount for Rocket; cash offers are often more appealing than stock. Truebill potentially could have secured an additional $100 million if the transaction included a stock component, such as a 50/50 split. These figures are approximate, however.

While the acquisition provides positive outcomes for Truebill’s investors, it also serves as a cautionary signal. Why would a fintech company with roughly 100% growth and nearly nine-figure ARR sell for a price just below unicorn status? This outcome delivers immediate liquidity for Truebill’s backers, but may present unfavorable comparisons for other fintech companies.

The valuation feels somewhat weak.

The impact of Nubank’s IPO performance could be a contributing factor. Alternatively, this could reflect a broader trend of declining software multiples observed in recent quarters. It’s also possible that internal factors within Truebill, such as unexpectedly high sales and marketing costs, influenced the decision; integration with Rocket could potentially reduce customer acquisition expenses and improve its financial standing.

Further insights will emerge when Rocket releases its first full quarterly report incorporating Truebill’s performance. The acquisition is expected to be finalized within the current year.