Key facts
- UWM Holdings Corp. reported a $451.9 million net loss for the second quarter.
- A $603.2 million derivatives loss significantly impacted the company's quarterly results.
- The company secured a $2.05 billion capital raise, including $1.5 billion from Oaktree Capital Management.
- A securities fraud investigation has been opened into UWM by the Law Offices of Frank R. Cruz.
- Analysts from BTIG and Keefe, Bruyette & Woods significantly reduced their price targets for UWM stock.
- UWM suspended its quarterly dividend, preserving approximately $640 million annually.
UWM Holdings Corp. is confronting a securities fraud investigation and significant analyst downgrades following a second-quarter net loss of $451.9 million. The loss was largely attributed to a $603.2 million derivatives loss stemming from a hedge related to its attempted acquisition of Two Harbors Investment Corp.'s mortgage servicing rights portfolio. This financial setback contributed to a 43.6% year-over-year decrease in total equity.
The Law Offices of Frank R. Cruz announced an investigation into potential federal securities law violations, prompting UWM shares to fall 34.78% to $1.20 on Thursday. The law firm is seeking information from investors who may have sustained losses.
Despite these challenges, UWM maintains a substantial market presence, holding an 8.5% overall mortgage market share and a dominant 40.5% share in the wholesale channel. Analysts are adjusting their valuations; BTIG reaffirmed a 'buy' rating but cut its price target to $2 from $4, citing dilution from a recent capital raise and weaker-than-expected operating results. Keefe, Bruyette & Woods also reduced its price target to $2.75 from $3.75 while maintaining an 'outperform' rating, noting that expenses are expected to improve in 2027.
UWM recently secured a $2.05 billion capital raise, including a $1.65 billion preferred equity deal funded by $1.5 billion from Oaktree Capital Management and $150 million from an Ishbia family vehicle. The preferred equity accrues at 10% if paid in cash or 13% if paid in kind. Additionally, UWM's board suspended its quarterly dividend, a move expected to preserve approximately $640 million annually.