Gores Holdings IV Inc (NASDAQ: GHIV) is set to close in on its merger with United Wholesale Mortgage. The merger marks an exciting new chapter for the mortgage lender, as it will list on the NASDAQ under the ticker UWMC. Shareholders of Gores Holding stock voted yesterday to seal the merger, which is the final obstacle until finalisation. In addition, investors expect the merger deal to be completed by early next week if the vote is successful. This article will breakdown everything investors need to know as the GHIV merger moves closer to finalisation.
Table of contents
Key Details surrounding the merger
- GHIV closing in on its merger with United Wholesale Mortgage, LLC. UMW is the largest wholesale mortgage lender for the United States five years running.
- The merger is worth approximately $16.1 Billion, making this figure the biggest business combination for a SPAC company, to this date.
- GHIV raised $425 million from IPO which is being reinvested to UWM, and an additional $500 million raised from the private placement.
- Existing UWM investors will retain 94% stake in the combined company, while GHIV investors will own the remaining 6% of the combined company.
- The combined company will trade on NASDAQ with a ticker of “UMWC” .UMWC has plans to distribute an annual dividend of $0.40 per share.
“After evaluating a number of potential partners for Gores Holdings IV, this transaction clearly stood out as a superior option for our stockholders. The public company currency of a newly listed business will enable the Company to continue to benefit from the ongoing tailwinds in the mortgage industry and capitalize on growth opportunities in a massive addressable market. We are excited to participate in UWM’s continued value creation through a meaningful remaining equity stake in the business.”Mark Stone, Chief Executive Officer of Gores Holdings IV
UWMC stock forecast for 2021 and beyond
Firstly, it is clear why this SPAC merger is making so much noise on Wallstreet. Investors are banking that United Wholesale Mortgage’s can provide a potential gain as we move into the new year. Here’s what investors are banking on:
Revenue forecasts for UWM
United Wholesale Mortgage’s (UMW) net income went from $67 million in 2018 to $303 million in 2019. Furthermore, as of last year the company was estimated to reach over $2 Billion in net income. The general increase in revenue is contributed by borrowers taking advantage of the current low-interest rates by refinancing their mortgages. Furthermore, UWM has projected earnings for 2022 of $1.8 Billion.
In addition, if the transaction proceeds it will enable UWM to accelerate the implementation of its business plan. For example, this includes the focus of providing ‘superior services’ to the companies broker-clients and to capitalize on growth opportunities.
External factors to play a role
Secondly, the company forecasts the market share of wholesale mortgages to grow to 33% by 2026, compared to past figures of 20% in 2019. According to a Barron article, CEO Mat Ishbia says “UWM is poised to succeed as rate-sensitive refinance business dies down and home buyers seek out brokers for help obtaining a mortgage”. Furthermore, the U.S. mortgage market is experienced $3.3 trillion in anticipated mortgage originations, according to data from the Mortgage Bankers Association.
We remind our viewers that this is not financial advice. Instead, the information above is an investment commentary from extensive research.
In conclusion, it is clear this is an exciting new chapter for the mortgage broking company. Assuming the merger is to proceed, investors have vouched their interest in the mortgage broking giant. Firstly, the positive net income growth in the past year is a strong sign for investors. In addition, external factors have positively impacted the United Wholesale Mortgage business. Lastly, the cash injection from the SPAC offering will allow the business to thrive in its business planning for 2021 and beyond. However, investors should tread with caution as negative external factors could also impact the companies performance in the future.We will continue to cover developments as the companies prepare to finalise the merger assuming the vote goes through as planned.
Written by Zac Lorschy and Tyger Fitzpatrick
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.