A company controlled by UWM Holdings Chairman and CEO Mat Ishbia has reversed course and postponed its proposed secondary stock offering because the company's share price stalled.
After the market closed on November 16, UWM announced that SFS Holding, its majority shareholder, plans to sell 50 million Class A shares. At the same time, UWM would buy back $ 100 million of the shares in SFS – which can be converted one-for-one into Class A common stock – at a price per share equal to what the underwriter of the secondary offering would have bought the shares. This share buyback was part of UWM's proposed $ 300 million buyback program.
The aim of the secondary sale was to increase the public float of UWM Holdings by approx. 50% and thus create liquidity in the share in order to arouse the interest of larger indices and institutional investors. In addition, the simultaneous repurchase would have reduced the number of shares outstanding without reducing the public free float.
"As the principal owner of SFS, I was willing to sell a percentage of our property in UWM at a lower value than I think was appropriate as we were advised that an increased IPO would benefit UWMC shareholders, including its largest shareholder SFS, "Ishbia said in a press release. "Although there was more than enough demand from potential investors, the general market conditions were unfortunately such that the prices on offer were not at a level that I will maintain."
Through SFS, Ishbia controls 94% of UWM Holdings' equity.
As an alternative, UWM is now accelerating the buyback program and will attempt to increase the IPO at a later date, the press release said.
In addition to the sale of shares, UWM also announced a bond offer before the market opened on November 15. That morning, UWM common stock opened trading at $ 6.96 per share and closed at $ 6.85 later in the day.
The following day it opened at $ 6.84 and ended 23 cents per share lower at $ 6.61. That night the SFS offering was announced, and while UWM opened at $ 6.57 per share on Nov. 17, it had dropped to $ 5.95 by the end of the trading day.
UWM's opening on Nov. 18 was six cents per share higher than its previous closing price of $ 6.01. But the downward slide continued, and at one point the stock hit a 52-week low of $ 5.41 per share before climbing back to $ 5.52.
That night, SFS pulled the plug, and investors reacted immediately when UWM opened at $ 6.69 per share on Nov. 19, up $ 1.17.
"As both CEO of UWM and majority shareholder of UWMC, I believe the company is poised to perform even better in the quarters ahead," said Ishbia. "We will aggressively use our remaining repurchase authority at these prices, and when the market returns to reasonable levels SFS will be ready to do its part by providing availability to increase public circulation, but the terms have to make sense, and." Getting a deal on these levels today didn't make sense to me. "