UWMC

Business Context and Reporting Period

This Form 8-K, dated January 21, 2021, reports the consummation of the business combination between UWM Holdings Corporation (formerly Gores Holdings IV, Inc.) and United Wholesale Mortgage, LLC (UWM). Following the closing, the company ceased to be a shell company and adopted an "Up-C" structure where UWM operates as a limited liability company owned by the public holding company. The company's Class A Common Stock and Warrants began trading on the New York Stock Exchange (NYSE) on January 22, 2021, under the symbols "UWMC" and "UWMCW," respectively.

Key Financial Metrics and Capital Structure

• Cash Consideration: The Company contributed approximately $894.5 million in cash to UWM LLC at closing. This amount was derived from the Trust Account (net of redemptions), other available funds, and gross proceeds of approximately $500 million from a Private Placement.
• Redemptions: Holders of 20,795 shares of Class A Stock elected to redeem their shares for approximately $10.01 per share, totaling approximately $208,113.
• Trust Account Balance: Immediately prior to closing, the Trust Account balance was approximately $425.1 million after redemptions.
• Transaction Expenses: Transaction fees and expenses did not exceed $36 million in the aggregate.
• Capital Structure Post-Closing:
  • 103,104,205 shares of Class A Common Stock outstanding.
  • 1,502,069,787 shares of Class D Common Stock outstanding (held by SFS Corp.).
  • 10,625,000 Public Warrants and 5,250,000 Private Placement Warrants outstanding.
• Debt and Liquidity: Specific details regarding loan funding facilities and senior notes are incorporated by reference from the Proxy Statement; this filing does not provide specific outstanding debt balances or liquidity ratios.

Material Changes and Agreements

The filing details several material agreements entered into on the Closing Date:

• Tax Receivable Agreement (TRA): The Company entered into a TRA with SFS Corp. The Company will pay SFS Corp. 85% of the cash tax savings realized from certain tax basis adjustments. The Company estimates these payments will aggregate to approximately $3.6 billion over the next 25 years, ranging from $15.8 million to $304.1 million annually based on a $10 share price assumption.
• Registration Rights: An Amended and Restated Registration Rights Agreement was executed, granting registration rights to specific holders. SFS Corp. is subject to an 180-day lock-up period on its Class A Stock.
• Incentive Plan: The UWM Corporation 2020 Omnibus Incentive Plan was approved to provide equity ownership opportunities to attract and retain talent.
• Accountant Change: Deloitte & Touche LLP was appointed as the independent registered public accounting firm, replacing KPMG LLP. No disagreements were reported with the former accountant.

Executive Compensation (Fiscal 2020)

While the filing focuses on the transaction, it includes a Summary Compensation Table for Fiscal 2020 for Named Executive Officers (NEOs):

Outlook, Risks, and Contingencies

Forward-Looking Statements: The filing contains numerous forward-looking statements regarding future financial performance, loan origination growth, and market conditions. Management does not undertake an obligation to update these statements.

Key Risks:

• Dependence on macroeconomic conditions and U.S. residential real estate markets, specifically interest rate changes.
• Reliance on warehouse facilities for funding and the risk of margin calls.
• Dependence on Government-Sponsored Enterprises (GSEs) and changes to their guidelines or roles.
• Impact of the COVID-19 pandemic on operations and liquidity.
• Substantial future payments under the Tax Receivable Agreement.

Earn-Out Provisions: SFS Corp. is entitled to receive additional earn-out shares if the Class A Stock price exceeds certain thresholds over the next five years. The maximum number of earn-out shares will not exceed 6% of the Company Equity Value divided by $10.00.

Investor Verification Checklist

• Tax Receivable Agreement Impact: Verify the potential cash outflow of up to $3.6 billion over 25 years under the TRA and its impact on future free cash flow.
• Debt Facilities: Review the Proxy Statement for specific details on loan funding facilities and senior notes, as this 8-K only incorporates them by reference.
• Ownership Concentration: Note that SFS Corp. (controlled by the Ishbia family) holds 100% of Class D Stock and effectively controls the company, with 79% of total voting power.
• Redemption Activity: Confirm the minimal redemption activity (only 20,795 shares) relative to the total public float, indicating strong initial support.
• Accountant Transition: Acknowledge the switch from KPMG to Deloitte and review the transition for any potential audit scope changes.