{"id":48204,"date":"2026-04-01T23:23:18","date_gmt":"2026-04-01T20:23:18","guid":{"rendered":"https:\/\/mk.gen.tr\/uwm-tried-for-its-first-acquisition-then-its-stock-fell-and-the-math-stopped-working\/"},"modified":"2026-04-01T23:23:18","modified_gmt":"2026-04-01T20:23:18","slug":"uwm-tried-for-its-first-acquisition-then-its-stock-fell-and-the-math-stopped-working","status":"publish","type":"post","link":"https:\/\/mk.gen.tr\/en\/uwm-tried-for-its-first-acquisition-then-its-stock-fell-and-the-math-stopped-working\/","title":{"rendered":"UWM tried for its first acquisition, then its stock fell and the math stopped working"},"content":{"rendered":"

When UWM Holdings Corp.<\/strong> lost its bid<\/a> last week to acquire Two Harbors Investment Corp<\/strong>. (TWO), upstaged by an offer from rival CrossCountry Intermediate HoldCo<\/strong>, analysts were not entirely surprised.<\/p>\n

\u201cIt was such a wild turn of events,\u201d said Eric Hagen, an analyst at BTIG<\/strong>. \u201cBut we were not surprised that it broke up.\u201d<\/p>\n

The deal would have marked UWM<\/a>\u2019s first acquisition. The company, founded in 1986 by Jeff Ishbia and led by his son Mat Ishbia<\/a> since 2013, has historically relied on organic growth. This time, however, it ran into market headwinds and structural challenges tied to its model as it sought to complete a deal. What exactly went wrong?\u00a0<\/p>\n

Analysts pointed to a sharp decline in UWM\u2019s stock price as a key factor, while the company told HousingWire<\/strong> this has nothing to do with its fundamentals. Shares fell amid a volatile quarter for the mortgage industry as a whole, which included geopolitical tensions involving Iran<\/a>, a wave of M&A activity<\/a> and rising mortgage rates<\/a>.\u00a0<\/p>\n

UWM\u2019s stock, which closed at $5.12 prior to the deal announcement, traded near $3.60 on Wednesday morning \u2014 well below levels typically required for broad institutional ownership.<\/p>\n

\u201cA lot of institutions can\u2019t hold it (at this level), which causes further selling,\u201d said Kevin Heal, a fixed income strategist at Argus Research<\/strong>. \u201cThen you have selling from Mat Ishbia, which I could see as a way to increase the float.\u201d\u00a0<\/p>\n

UWM is controlled by SFS Corp.<\/strong>, whose ownership declined from about 90% at the end of 2024 to roughly 83% at the end of 2025, according to filings<\/a> with the Securities and Exchange Commission<\/strong> (SEC).<\/p>\n

The company has been actively working to expand its public float. A registration statement \u2014 under a 10b5-1 plan allowing insiders to trade company stocks \u2014 states that SFS Corp. can resell up to 150 million shares of Class A common stock, with about 45.7 million shares remaining unsold at the end of February.<\/p>\n

The proposed acquisition of Two Harbors<\/a> was also expected to support that effort by increasing the number of publicly traded shares. Pro forma estimates suggested the deal could have expanded UWM\u2019s float to roughly 500 million shares, up from about 268 million at the end of 2025.\u00a0<\/p>\n

In February and March, share sales under the registration statement totaled approximately 11 million shares, according to SEC filings. <\/p>\n

Despite expectations that these sales occur and their low volume compared to the ownership structure, the fact that the owners are selling the assets was not \u201csending a good message\u201d to investors, Heal said.\u00a0<\/p>\n

A spokesperson for UWM said the 10b5-1 plan \u201cwas put in place prior to this deal ever starting\u201d and was designed to increase float \u2014 something analysts and investors \u201chave consistently asked for.\u201d<\/p>\n

The company also said the plan has \u201cabsolutely nothing to do with margin requirements or anything tied to the Suns acquisition.\u201d Mat Ishbia reportedly<\/a> pledged a significant portion of his equity in UWM Holdings Corp. as collateral to secure loans for his roughly $4 billion purchase of the Phoenix Suns and Phoenix Mercury in 2023. <\/p>\n

\u201cAny suggestions otherwise are completely false,\u201d the spokesperson said.<\/p>\n

They added that the company\u2019s recent stock decline is not tied to business performance<\/a>, pointing to an \u201camazing\u201d fourth quarter and a \u201cstrong start in Q1.\u201d The spokesperson added that, relative to peers, the stock is down less on a year-to-date basis.<\/p>\n

\u201cThe stock price decline can be mostly attributed to our announcement of working with Two Harbors, not tied to our success at the company,\u201d the spokesperson said.<\/p>\n

Stock structure was central<\/h2>\n

UWM\u2019s stock sits at the center of the failed bid for TWO since the transaction was structured as an all-stock deal. As UWM\u2019s share price declined, the offer became less compelling to TWO shareholders.<\/p>\n

Under UWM\u2019s proposal<\/a>, investors would have received 2.3328 shares of UWMC Class A common stock for each share of TWO, implying a value of $11.94 based on UWMC\u2019s Dec. 16 closing price and a total deal value of roughly $1.3 billion. The same offer now would value each share at $8.40 or 30% less. <\/p>\n

By contrast, CrossCountry Mortgage<\/strong> offered an all-cash deal valued at $10.80 per share, or about $1.13 billion \u2014 removing market risk for sellers.<\/p>\n

\u201cUnited Wholesale had an opportunity to come in with a cash offer to match CrossCountry\u2019s offer. They just don\u2019t have the cash on the balance sheet to support that,\u201d Hagen said. \u201cThey don\u2019t operate with a lot of cash. Some of that is intentional since they have an origination machine.\u201d\u00a0<\/p>\n

UWM said in its most recent earnings report that it had roughly $500 million in available cash.\u00a0 The company also generated approximately $700 million in adjusted EBITDA in 2025, a proxy for operating performance. While the company could have raised additional liquidity for the acquisition, such a move would have come with trade-offs.<\/p>\n

Market constraints may limit that flexibility. \u201cThey could tolerate higher leverage to some degree, but I don\u2019t know if the stock can really support much more,\u201d Hagen said.<\/p>\n

UWM\u2019s nonfunding debt-to-equity ratio \u2013 excluding funding tied directly to loan origination, which turn over quickly and are less relevant for M&A capacity \u2013 rose to 2.69x at the end of the fourth quarter, up from 1.66x a year earlier and driven in part by declining equity.\u00a0<\/p>\n

\u201cThe reason this transaction would have worked well for UWM was because it was a stock offer,\u201d said Bose George, an analyst at Keefe, Bruyette & Woods<\/strong> (KBW). \u201cIt would have allowed them to use equity to buy Two Harbors at a reasonable price, and help increase their float.\u201d<\/p>\n

George added that while a cash deal may have been \u201cfeasible,\u201d it did not align with UWM\u2019s broader strategy. One example: \u201cAt the end of the year, it looks like they had about 11% to 12% equity funding the warehouse. Normally, you need less than 5%, so it suggests that they\u2019re probably $500 million plus of excess just sitting in the warehouse.\u201d<\/p>\n

The UWM spokesperson said the company \u201chas ample access to cash and could have easily completed the transaction with cash.\u201d<\/p>\n

But the spokesperson added that \u201cas we dug deeper into the Two Harbors business, it became clear that the primary value was the MSR<\/a> book. The operational and capital markets components \u2014 and some of the other areas we were led to believe would deliver value \u2014 were not, as found. Given that, there was no reason for us to try to put forth an all-cash offer because that wouldn\u2019t have been what\u2019s best for UWM.\u201d\u00a0<\/p>\n

Scale intact despite deal setback<\/h2>\n

Another key benefit of the proposed transaction was the ability for UWM to expand its MSR portfolio without deploying significant capital. According to George, UWM originates roughly $50 billion per quarter \u2014 or $200 billion annually, which is roughly equivalent to the size of TWO\u2019s servicing book.<\/p>\n

\u201cBut if you retain MSR when you\u2019re originating, you need your own capital to do it. That\u2019s the piece of Two Harbors that we liked. But from the scale standpoint, it\u2019s hard to say that these guys (UWM) are disadvantaged. They\u2019re the biggest U.S. originator.\u201d\u00a0<\/p>\n

The deal would have added approximately $176 billion in unpaid principal balance of MSRs, nearly doubling UWM\u2019s servicing portfolio to about $400 billion.\u00a0<\/p>\n

\u201cIt made sense at the right price, but we weren\u2019t willing to get much more aggressive,\u201d the UWM spokesperson said.<\/p>\n

\u201cAt UWM, we\u2019re extremely disciplined and in all our years of doing business, we\u2019ve never acquired another company. We don\u2019t do deals unless there\u2019s something truly valuable there,\u201d they added. \u201cWhile the MSR portfolio was valuable, UWM originates such high volumes every quarter that we can create that servicing<\/a> ourselves. Although the MSR portfolio presented potential upside, it was not sufficient to justify pushing beyond our disciplined approach.\u201d\u00a0<\/p>\n

Hagen noted the deal valuation was at only a modest premium to book value. \u201cThe valuation was never very lofty to us. It was always very rational versus the Rocket-Mr. Cooper <\/strong>deal<\/a>, where they\u2019re buying them at two times book value,\u201d Hagen said. \u201cWe feel like they\u2019re not losing a lot by losing the deal. They were never paying a lot for it.\u201d\u00a0<\/p>\n

Hagen added that the transaction was not expected to be meaningfully accretive to earnings, but rather to cash flow, supported by roughly $150 million in projected synergies. He still views UWM as an attractive name given its valuation and focus on scale and servicing.<\/p>\n

From a fundamental standpoint, Hagen said the failed deal does not materially alter UWM\u2019s outlook. \u201cBut optically, it\u2019s not a great look to see a deal fall apart.\u201d<\/p>","protected":false},"excerpt":{"rendered":"

When UWM Holdings Corp. lost its bid last week to acquire Two Harbors Investment Corp. (TWO), upstaged by an offer from rival CrossCountry Intermediate HoldCo, analysts were not entirely surprised. \u201cIt was such a wild turn of events,\u201d said Eric Hagen, an analyst at BTIG. \u201cBut we were not surprised that it broke up.\u201d The…<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/posts\/48204"}],"collection":[{"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/comments?post=48204"}],"version-history":[{"count":0,"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/posts\/48204\/revisions"}],"wp:attachment":[{"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/media?parent=48204"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/categories?post=48204"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mk.gen.tr\/en\/wp-json\/wp\/v2\/tags?post=48204"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}