UWM Faces Fraud Probe After $603.2 Million Hedge Loss, Analysts Cut Targets
Updated
Updated · HousingWire · Aug 10
UWM Faces Fraud Probe After $603.2 Million Hedge Loss, Analysts Cut Targets
1 articles · Updated · HousingWire · Aug 10
Summary
$603.2 million in derivatives losses tied to UWM’s hedge around a Two Harbors mortgage-servicing deal helped drive a $451.9 million Q2 net loss, triggering a securities-fraud investigation and fresh Wall Street downgrades.
Total equity fell 43.6% from a year earlier, and the company raised $2.05 billion of capital to shore up the balance sheet after the hedge loss exposed higher-than-expected leverage.
BTIG cut its price target to $2 from $4 and KBW lowered its target to $2.75 from $3.75, though both kept bullish ratings and said UWM’s core wholesale mortgage franchise remains strong.
A $1.65 billion preferred equity deal led by Oaktree carries a 10% cash dividend rate, while UWM suspended its 10-cent quarterly dividend, a move KBW said should preserve about $640 million annually.
UWM shares closed down 34.78% at $1.20 on Thursday before rebounding to $1.40, even as the Frank R. Cruz law firm said it is gathering investor claims but has not yet filed a lawsuit.