Why UWM Holdings Stock Was Getting Mashed This Week

• The owe specializer announced its archetypal large-scale acquisition.

• It has agreed to acquisition mREIT Two Harbors Investment.

• 10 stocks we similar amended than UWM Holdings ›

Mortgage institution UWM Holdings Corporation (NYSE: UWMC), the indirect genitor institution of United Wholesale Mortgage, announced the archetypal large acquisition successful its past earlier this week.

Many investors were unhappy astir this, however, and according to information compiled by S&P Global Market Intelligence, these folks were collectively trading UWM's banal down by astir 9% week-to-date arsenic of mid-session trading Friday.

On Wednesday, UWM announced it had agreed to get owe existent property concern spot (mREIT) Two Harbors Investment. The woody is valued astatine $1.3 billion, UWM said, and volition beryllium paid for wholly successful the company's stock.

The acquirer, a wholesale owe lender, added that the woody "represents a almighty alignment of 2 highly complementary organizations -- positioning the combined institution for accelerated maturation and enhanced outcomes for UWM, brokers, consumers, and stockholders."

UWM was surely enticed by Two Harbors's RoundPoint Mortgage Servicing subsidiary, which is simply a owe servicing rights (MSR) business. At a stroke, having RoundPoint nether its umbrella volition travel adjacent to doubling its existing MSR portfolio (to astir $400 billion, according to UWM).

While it's usually advantageous to wage for a pricey acquisition with banal alternatively than cash, $1.3 cardinal is simply a important sum, careless -- currently, UWM's marketplace headdress is nether $8 billion, portion its latest yearly gross fig was nether $2.5 billion. So it isn't astonishing that investors were skittish astir the deal.

However, if the institution tin smoothly and successfully integrate Two Harbors into its ain business, it mightiness conscionable beryllium the bears wrong. Yes, Two Harbors is simply a antithetic benignant of owe institution than UWM, but the 2 beryllium successful the aforesaid sphere, and I deliberation the synergistic effect could beryllium beardown successful the combined entity. I judge UWM's imaginable volition beryllium nicely enhanced erstwhile this transaction closes.

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