Uwm Tried For Its First Acquisition, Then Its Stock Fell And The Math Stopped Working

When UWM Holdings Corp. lost its bid last week to acquire Two Harbors Investment Corp. (TWO), upstaged by an offer from rival CrossCountry Intermediate HoldCo, analysts were not entirely surprised.

“It was such a wild turn of events,” said Eric Hagen, an analyst at BTIG. “But we were not surprised that it broke up.”

The deal would have marked UWM’s first acquisition. The company, founded in 1986 by Jeff Ishbia and led by his son Mat Ishbia since 2013, has historically relied on organic growth. This time, however, it ran into market headwinds and structural challenges tied to its model as it sought to complete a deal. What exactly went wrong? 

Analysts pointed to a sharp decline in UWM’s stock price as a key factor, while the company told HousingWire this has nothing to do with its fundamentals. Shares fell amid a volatile quarter for the mortgage industry as a whole, which included geopolitical tensions involving Iran, a wave of M&A activity and rising mortgage rates. 

UWM’s stock, which closed at $5.12 prior to the deal announcement, traded near $3.60 on Wednesday morning — well below levels typically required for broad institutional ownership.

“A lot of institutions can’t hold it (at this level), which causes further selling,” said Kevin Heal, a fixed income strategist at Argus Research. “Then you have selling from Mat Ishbia, which I could see as a way to increase the float.” 

UWM is controlled by SFS Corp., whose ownership declined from about 90% at the end of 2024 to roughly 83% at the end of 2025, according to filings with the Securities and Exchange Commission (SEC).

The company has been actively working to expand its public float. A registration statement — under a 10b5-1 plan allowing insiders to trade company stocks — states that SFS Corp. can resell up to 150 million shares of Class A common stock, with about 45.7 million shares remaining unsold at the end of February.

The proposed acquisition of Two Harbors was also expected to support that effort by increasing the number of publicly traded shares. Pro forma estimates suggested the deal could have expanded UWM’s float to roughly 500 million shares, up from about 268 million at the end of 2025. 

In February and March, share sales under the registration statement totaled approximately 11 million shares, according to SEC filings.

Despite expectations that these sales occur and their low volume compared to the ownership structure, the fact that the owners are selling the assets was not “sending a good message” to investors, Heal said. 

A spokesperson for UWM said the 10b5-1 plan “was put in place prior to this deal ever starting” and was designed to increase float — something analysts and investors “have consistently asked for.”

The company also said the plan has “absolutely nothing to do with margin requirements or anything tied to the Suns acquisition.” Mat Ishbia reportedly pledged a significant portion of his equity in UWM Holdings Corp. as collateral to secure loans for his roughly $4 billion purchase of the Phoenix Suns and Phoenix Mercury in 2023.

“Any suggestions otherwise are completely false,” the spokesperson said.

They added that the company’s recent stock decline is not tied to business performance, pointing to an “amazing” fourth quarter and a “strong start in Q1.” The spokesperson added that, relative to peers, the stock is down less on a year-to-date basis.

“The stock price decline can be mostly attributed to our announcement of working with Two Harbors, not tied to our success at the company,” the spokesperson said.

Stock structure was central

UWM’s stock sits at the center of the failed bid for TWO since the transaction was structured as an all-stock deal. As UWM’s share price declined, the offer became less compelling to TWO shareholders.

Under UWM’s proposal, investors would have received 2.3328 shares of UWMC Class A common stock for each share of TWO, implying a value of $11.94 based on UWMC’s Dec. 16 closing price and a total deal value of roughly $1.3 billion. The same offer now would value each share at $8.40 or 30% less.

By contrast, CrossCountry Mortgage offered an all-cash deal valued at $10.80 per share, or about $1.13 billion — removing market risk for sellers.

“United Wholesale had an opportunity to come in with a cash offer to match CrossCountry’s offer. They just don’t have the cash on the balance sheet to support that,” Hagen said. “They don’t operate with a lot of cash. Some of that is intentional since they have an origination machine.” 

UWM said in its most recent earnings report that it had roughly $500 million in available cash.  The company also generated approximately $700 million in adjusted EBITDA in 2025, a proxy for operating performance. While the company could have raised additional liquidity for the acquisition, such a move would have come with trade-offs.

Market constraints may limit that flexibility. “They could tolerate higher leverage to some degree, but I don’t know if the stock can really support much more,” Hagen said.

UWM’s nonfunding debt-to-equity ratio – excluding funding tied directly to loan origination, which turn over quickly and are less relevant for M&A capacity – rose to 2.69x at the end of the fourth quarter, up from 1.66x a year earlier and driven in part by declining equity. 

“The reason this transaction would have worked well for UWM was because it was a stock offer,” said Bose George, an analyst at Keefe, Bruyette & Woods (KBW). “It would have allowed them to use equity to buy Two Harbors at a reasonable price, and help increase their float.”

George added that while a cash deal may have been “feasible,” it did not align with UWM’s broader strategy. One example: “At the end of the year, it looks like they had about 11% to 12% equity funding the warehouse. Normally, you need less than 5%, so it suggests that they’re probably $500 million plus of excess just sitting in the warehouse.”

The UWM spokesperson said the company “has ample access to cash and could have easily completed the transaction with cash.”

But the spokesperson added that “as we dug deeper into the Two Harbors business, it became clear that the primary value was the MSR book. The operational and capital markets components — and some of the other areas we were led to believe would deliver value — were not, as found. Given that, there was no reason for us to try to put forth an all-cash offer because that wouldn’t have been what’s best for UWM.” 

Scale intact despite deal setback

Another key benefit of the proposed transaction was the ability for UWM to expand its MSR portfolio without deploying significant capital. According to George, UWM originates roughly $50 billion per quarter — or $200 billion annually, which is roughly equivalent to the size of TWO’s servicing book.

“But if you retain MSR when you’re originating, you need your own capital to do it. That’s the piece of Two Harbors that we liked. But from the scale standpoint, it’s hard to say that these guys (UWM) are disadvantaged. They’re the biggest U.S. originator.” 

The deal would have added approximately $176 billion in unpaid principal balance of MSRs, nearly doubling UWM’s servicing portfolio to about $400 billion. 

“It made sense at the right price, but we weren’t willing to get much more aggressive,” the UWM spokesperson said.

“At UWM, we’re extremely disciplined and in all our years of doing business, we’ve never acquired another company. We don’t do deals unless there’s something truly valuable there,” they added. “While the MSR portfolio was valuable, UWM originates such high volumes every quarter that we can create that servicing ourselves. Although the MSR portfolio presented potential upside, it was not sufficient to justify pushing beyond our disciplined approach.” 

Hagen noted the deal valuation was at only a modest premium to book value. “The valuation was never very lofty to us. It was always very rational versus the Rocket-Mr. Cooper deal, where they’re buying them at two times book value,” Hagen said. “We feel like they’re not losing a lot by losing the deal. They were never paying a lot for it.” 

Hagen added that the transaction was not expected to be meaningfully accretive to earnings, but rather to cash flow, supported by roughly $150 million in projected synergies. He still views UWM as an attractive name given its valuation and focus on scale and servicing.

From a fundamental standpoint, Hagen said the failed deal does not materially alter UWM’s outlook. “But optically, it’s not a great look to see a deal fall apart.”