Business context and reporting period
Entity clarification: This is Gores Holdings IV, Inc.’s Form 10-Q, not an operating-company quarterly report from UWM Holdings Corp. Gores was a blank-check company pursuing a business combination with United Wholesale Mortgage (UWM). The reporting period ended September 30, 2020; the filing was signed November 5, 2020.
Gores had not commenced operating activities or generated operating revenue. Its activity consisted of formation, its January 2020 IPO, and seeking and negotiating a business combination. The figures below describe Gores, not UWM’s mortgage business.
Financial results and position
| Metric | Quarter ended September 30, 2020 | Nine months ended September 30, 2020 / period-end |
|---|---|---|
| Revenue | None | None |
| Net loss | $5.35 million | $4.88 million |
| Interest and dividend income | $39,551 | $1.09 million |
| Net cash used in operating activities | Not separately provided for the quarter | $1.49 million |
| Cash outside trust | — | $222,372 at September 30 |
| Trust investments and cash | — | $425.32 million at September 30 |
| Current liabilities | — | $4.50 million at September 30 |
| Working capital | — | Negative $4.03 million at September 30 |
Quarterly loss was primarily professional and other expenses of $5.34 million. The nine-month loss was $4.88 million, versus a $21,231 loss in the comparable 2019 inception-to-September period; the 2019 period was not a full nine months. Quarterly 2019 net loss was $21,231. Profit margins are not meaningful because the company had no operating revenue. The company reported no long-term debt obligations; it had a $1.0 million unsecured, non-interest-bearing sponsor note due at the earlier of June 30, 2021 or business-combination closing.
Cash provided by financing activities was $427.04 million for the nine months, principally IPO and private-warrant proceeds, partly offset by underwriting and offering payments. Investing activities used $425.32 million, primarily the deposit of IPO proceeds and reinvested trust income. Trust investments earned an approximately 0.03% annualized return.
Material changes and proposed transaction
- Gores completed a $425 million public offering in January 2020 and placed $425 million in trust. At September 30, 40,141,937 public shares, with a redemption value of $401.42 million, were classified outside permanent equity.
- On September 22, 2020, Gores entered into an agreement to combine with UWM. The proposed structure contemplated Gores owning approximately 6% of UWM LLC’s combined units and SFS Corp. retaining approximately 94%, with Gores as sole manager.
- At closing, Gores expected to contribute approximately $896 million in cash, assuming no public-share redemptions. The agreement set a $16.052 billion Company Equity Value, subject to specified cash adjustments.
- Investors agreed to buy 50 million Class A shares at $10 per share in a private placement ($500 million gross proceeds), intended to partially fund the transaction’s cash consideration. The transaction remained subject to closing conditions and stockholder approval; it could be terminated in specified circumstances, including failure to close by March 31, 2021, subject to agreement terms.
- The agreement provided for potential earn-out shares over five years, capped at 6% of Company Equity Value if specified share-price thresholds were met. A tax receivable agreement would generally provide SFS Corp. 85% of certain realized tax savings.
Outlook, risks and unusual items
- No operating-company guidance or UWM business outlook is provided in this filing. Gores said it had until January 28, 2022 to complete a business combination; otherwise it would wind up and redeem public shares, and warrants would expire worthless.
- Management said available funds were believed sufficient to pursue a transaction, but warned that higher-than-estimated search, diligence, negotiation, or transaction costs could leave insufficient working capital. Cash outside the trust was only $222,372, while liabilities and expenses continued to accrue.
- Public shareholders could redeem shares in connection with the transaction. Redemptions reduce cash available, and Gores stated it would not redeem shares if doing so reduced net tangible assets below $5,000,001. The filing’s $896 million expected cash contribution assumes no redemptions.
- The $14.875 million deferred underwriting commission is payable only if a business combination is completed. The sponsor’s $1 million loan and ongoing administrative-service fees are related-party arrangements.
- Management said COVID-19 could negatively affect the company’s financial position, results, or target search, but the impact was not determinable. The filing reported no legal proceedings and no material change to previously disclosed risk factors other than risks discussed in a preliminary proxy statement.
- Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Investor verification points
- Confirm the reporting entity and period: this is Gores Holdings IV’s SPAC filing, not UWM’s operating results.
- Check subsequent transaction filings for closing status, actual redemptions, final cash proceeds, and changes to the proposed terms.
- Verify the final post-closing ownership, voting rights, earn-out conditions, and dilution from the private placement and warrants.
- Assess liquidity outside the trust, accumulating transaction expenses, sponsor financing, and the deferred underwriting fee.
- Review the definitive proxy and transaction documents for conditions, termination rights, tax-receivable obligations, and risks not detailed in this 10-Q.