UWM Holdings Stock Plunges 35% After Derivative Losses and Dividend Suspension

UWM Holdings, parent of United Wholesale Mortgage, the largest US home-mortgage lender, saw its stock plunge 35% to $1.20 per share, entering penny-stock territory. The company reported a $452 million net loss for Q2, driven by a $603 million derivatives loss from an interest-rate hedge that blew up, and a $123 million loss from declining fair value of mortgage servicing rights. CEO Mat Ishbia attributed the hedge failure to an over-hedged position during the failed acquisition attempt of Two Harbors Investment Corp. The company also suspended its dividend and announced a $2.05 billion equity infusion from Oaktree Capital Management and the Ishbia family, which could dilute existing shareholders by over 50%. UWM went public in January 2021 via a SPAC merger at a $16 billion valuation, the largest SPAC deal at the time. Since then, shares have collapsed 91%. The company operates in a housing market slump, with existing home sales and mortgage originations plunging. Nonbank mortgage lenders have cut employment by 39% since 2021. The equity infusion includes $1.65 billion in preferred equity and warrants from Oaktree and an Ishbia family vehicle, plus a $400 million rights offering.