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Is UWM Holdings a Buy After Announcing the Termination of a Secondary Offering?

Stock MarketsNov 23, 2021 01:30PM ET
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© Reuters. Is UWM Holdings a Buy After Announcing the Termination of a Secondary Offering?

Investors reacted favorably to the recent termination of mortgage lender UWM Holdings’ (UWMC) secondary public equity offering. The shares have rallied more than 12% since news of the cancelled offering. So, with poor earnings growth prospects amid a decelerating housing market, the question becomes is UWMC an ideal bet now? Read more to find out.UWM Holdings Corporation (UWMC), in Pontiac, Michigan, is the largest wholesale mortgage lender in the United States and is the publicly traded indirect parent of United Wholesale Mortgage, LLC. On November 18, UWMC’s secondary offering of Class A stock and concurrent share repurchase was terminated by its principal shareholder SFS Holding Corp.

Regarding the termination of the offering, company Chairman and CEO Mat Ishbia said, “As the principal owner of SFS, I was willing to sell a percentage of our ownership in UWM at less than what I think to be fair value because we were advised that increased float in the public market would be beneficial for the UWMC shareholders, including its largest shareholder, SFS. I was also willing to have SFS sell additional shares to the company at the same time and priced to make good on our buyback commitment and reduce the number of shares outstanding without also decreasing the public float. Unfortunately, while there was more than enough demand from potential investors, the overall market conditions were such that the prices offered were not at levels that I will entertain.”

UWMC’s public float was expected to increase 50% following the secondary offering, substantially lowering its EPS and ROE. Therefore, the cancellation of this offering has evoked a positive reaction from investors. Shares of UWMC have surged 12.3% in price since November 18 to close yesterday’s trading session at $6.93.

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Is UWM Holdings a Buy After Announcing the Termination of a Secondary Offering?
 

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