UWM's Rights Offering Seeks $400 Million, But The $2.00 Floor Sits Above A $1.26 Stock
The 8-K says the rights may not trade on the NYSE while shares stay below the minimum, and CEO Mat Ishbia's group must buy any unfunded amount.
UWM Holdings began a rights offering seeking up to $400 million, according to an 8-K filed Monday. The subscription price has a floor of $2.00 a share, well above the $1.26 NYSE close on the October 2 record date.
What the 8-K says
Every holder of Class A common stock on October 2 gets one right per share. Each right buys 0.57 shares at the greater of $2.00 or 85% of the volume-weighted average price over the ten consecutive trading days ending on the third trading day before expiration. A volume-weighted average price weights each day's price by the shares traded.
Up to 200,000,000 Class A shares are on offer, per the instructions exhibit. The offering expires at 5:00 p.m. Eastern on November 12, unless the company extends it with the backstop purchasers' consent. Unexercised rights then become void.
Holders who fully use their basic rights can also ask for leftover shares, allocated pro rata. The 8-K says the prospectus estimated 0.57 shares per right, and the final count on the record date came out at the same figure.
The filing also says the rights will not be eligible to trade on the NYSE while the stock stays under the $2.00 minimum price.
The backstop
If the offering raises less than $400 million, the Ishbia Support Parties must buy the shortfall, and the Oaktree Purchasers have the option to. The Ishbia group is SFS Group Capital and CEO Mat Ishbia. Oaktree's side is funds advised or managed by Oaktree Capital Management.
The filing says Ishbia is SFS Group's sole manager and indirectly controls the entity holding 75% of its equity. Gross proceeds, rights plus backstop, would be at least $400 million.
Backstop buyers can take Class A shares at the subscription price. They can instead take junior perpetual non-convertible preferred stock plus warrants for Class A shares, with warrants totaling 20% of the preferred's initial liquidation preference.
What to watch
UWMC traded at $1.30 in Monday after-hours trading, against a $1.29 regular close, before the filing was accepted at 5:20 p.m. ET (market data). The offering runs on a stock price below its own floor.
The share price matters because the floor only moves up if the ten-day average rises. How much the Ishbia and Oaktree backstop ends up funding depends on subscriptions by November 12.
Prospectus copies are being mailed to record holders, and the information agent, D.F. King, takes questions at (866) 406-2284.
Sources
- 8-K Filing — UWM Holdings Corp (UWMC) — SEC EDGAR
- Exhibit exhibit991-8k.htm — UWM Holdings Corp 8-K exhibit — SEC EDGAR
- Exhibit exhibit992-8k.htm — UWM Holdings Corp 8-K exhibit — SEC EDGAR
- Exhibit exhibit993-8k.htm — UWM Holdings Corp 8-K exhibit — SEC EDGAR
- Exhibit exhibit994-8k.htm — UWM Holdings Corp 8-K exhibit — SEC EDGAR
- Exhibit exhibit995-8k.htm — UWM Holdings Corp 8-K exhibit — SEC EDGAR
- Exhibit exhibit996-8k.htm — UWM Holdings Corp 8-K exhibit — SEC EDGAR
