United Wholesale Mortgage to Go Public, Valued at $ 16 Billion
United Wholesale Mortgage will go public later this year as part of the highest ever deal with a blank check company, the company said on Wednesday. He plans to merge with
The transaction values UWM at $ 16.1 billion, surpassing the $ 11 billion combination of MultiPlan and Churchill Capital III, backed by veteran PSPC colleague Michael Klein, announced earlier this year.
Share IV (ticker: GHIV) fell nearly 2% on Wednesday after the deal was revealed, to around $ 10.60. Most famous mortgage actor
(RKT) debuted in an initial public offering last month and faced lackluster demand from investors, having had to reduce its listing price. For UWM, management’s own projections predict a decline in profits over the next two years, and insiders are using the PSPC merger as a chance to cash in some of their stake. This could explain the mixed reception of the agreement.
After-sales services exploded in 2020: 109 IPOs have raised nearly $ 42 billion in revenue, more than the past five years combined, according to data from SPAC Insider. Faced with an uncertain and volatile market, more companies have chosen the SPAC route to go public than ever. SPACs raise funds from IPO investors in the form of cash shells, with the sponsors later identifying an operating company to merge with. Actions in PSPC convert into shares of the target company once they combine.
United Wholesale Mortgage is the largest player in the wholesale mortgage market in the United States. Operating exclusively in the wholesale industry, the Michigan-based company with more than 6,500 employees works with independent brokers to get borrowers to get their loans. This differentiates United Wholesale Mortgage from Rocket, which offers direct loans to consumers, as well as through brokers.
In a call with investors on Wednesday, UWM CEO Mat Ishbia said the broker model helps control the costs of acquiring clients and reduces its vulnerability to the cyclicality of the mortgage market. In 2019, the company’s share of the total mortgage market was 4.6%, she said in her presentation to investors. He expects that share to grow to 6.7% in 2020 and 9.2% by 2022. UWM sees its share of the wholesale mortgage market drop from 35% this year to 40% in 2022.
Gores Holdings IV went public in January, raising $ 425 million. Its $ 10 IPO units consisted of one common share and one quarter warrant, exercisable at $ 11.50. The CEO of PSPC is Mark Stone, Senior Managing Director of The Gores Group, a private equity firm whose founder, Alec Gores, is the President of PSPC. This is the latest of many SPAC offers for Gores.
Its previous vehicles took Public Hostess (TWNK) in 2016,
(VRRM) in 2018, and
(PAE) earlier this year. Gores is CEO of another SPAC,
Gores Metropoulos (GMHI), which announced a merger agreement with Luminar Technologies last month. Gores Holdings V (GRSV), a $ 525 million SPAC also with Stone as CEO and Gores as chairman, is still looking for a target.
UWM and Gores IV expect their combination to end by the end of this year, with the ticker converting to UWMC. The deal includes the $ 425 million from the PSPC trust, as well as an additional $ 500 million from a private investment in public stocks, or PIPE. After the expenditure, the proceeds will be used to buy back part of UWM’s private shareholders, with no money going to UWM. It is sometimes a red flag for SAVS, a bit like the CEO of a listed company selling its shares. Investors tend to prefer to see existing shareholders transfer all of their stakes in the combined public company, signaling that they believe the shares will be worth more in the future.
But UWM’s existing shareholders still have a lot of skin in the game: they will own nearly 94% of the combined public company. SPAC shareholders, PIPE investors and Gores IV sponsors will own the remainder. The management is convinced that UWM does not need outside money to develop its activities and plans to pay a dividend from next year.
Like Rocket, UWM is having a few significant years as borrowers take advantage of low interest rates thanks to refinancing their mortgages. The volume of loan origination increased from $ 42 billion in 2018 to $ 108 billion last year and is expected to reach $ 200 billion in 2020. The company’s net profit increased from $ 67 million in 2018 to $ 303 million in 2019 and she expects to make $ 2.1 billion this year. The company’s projections predict that assembly volume will reach $ 240 billion in 2022, while profits will drop to $ 1.8 billion.
Ishbia is optimistic not only about UWM’s ability to grow its market share, but also about the growth of the wholesale mortgage industry as a whole, especially once lower interest rates begin. to increase. The company predicts that the wholesale channel’s share of the overall mortgage market will grow to 33% by 2026, from 20% in 2019 and 15% in 2016. As the current refis boom driven by low interest rates has been a godsend for mortgage originators. , Ishbia says UWM is poised for success as rate-sensitive refinancing business collapses and homebuyers seek brokers to help them secure a mortgage.
“Our scale, our technology, our efficiencies mean that we will win in these cycles whether rates go up or down,” Ishbia said on the call. “We have done it before and we will continue to do it again.”
Write to Nicholas Jasinski at [email protected]