PreMarket Prep Stock Of The Day: UWM Holdings Corp

In this momentum-driven market, news can make you or break you. With respect to UWM Holdings Corp UWMC, a change of heart by the company has whipsawed shareholders something fierce over the past few days.

The treacherous price instigated by the companies actions makes it the PreMarket Prep Stock Of The Day.

The Company: UWM Holdings Corp, also known as United Wholesale Mortgage, engages in the origination, sale, and servicing of residential mortgage loans. The company provides independent mortgage advisors across the U.S.

UnSPACtacular Price Action: United Wholesale Mortgage made its public trading debut on Friday, Jan. 22. At the time, it was the largest-ever listing through a special purpose acquisition company. The issue ended its inaugural session at $11.35, comfortably above the flooring level in SPAC issues at $10.

Interestingly, the issue never reached the level it soared to ($14.38) on Dec. 28, when massive speculation in the SPAC sector sent several issues to levels they would never revisit. In fact, the issue peaked at $12.35 on its first day of trading and only surpassed it on one occasion, reaching $12.45 on March 3 but faltered to close that session at $9.62.

It should be noted the issue has spent very little time at above that close ever since.

Buyer Beware Under $10: In theory, there is a floor on the price of a SPAC issue before its acquisition is announced. In reality, once a deal is consummated and the new entity breaches $10, there is no true level of support below. How low the issue will fall is dependent on the fundamentals of the company and the Street’s perception of the issue moving forward.

On June 18, UWMC peaked at $10.02 and ended the session at $9.52 and was at $8 only two weeks later. Until this week, the all-time low was $6.38 and closed last Friday at $6.99.

Say What? One week after announcing solid third-quarter earnings results, which caused a brief pop to $7.51 before fading by the close, the company dropped a bomb on shareholders. After this Tuesday's close, the company announced a 50 million share offering with its share price at a depressed level.

From the price action on Wednesday and Thursday, it appeared there were no or few investors that wanted to be on the other side of the offering. This was evidenced by beating the issue took on Wednesday and into Thursday. In Thursday’s session, the issue made a new all-time low ($5.41) and an all-time closing low ($5.52).

Not So Fast: After the close on Thursday, the company announced that UWM Holdings and SFS Holding Corp, its principal shareholder, terminated the previously announced secondary offering of Class A Common Stock and concurrent stock repurchase effective immediately.

The offering was intended to increase UWMC’s public float by approximately 50%, thereby making it a more liquid, tradable stock for larger indexes and institutional investors, while at the same time utilizing the company’s buyback authorization to reduce the number of fully diluted shares outstanding.

However, the market’s reaction to the Offering resulted in a share price level at which SFS is not willing to sell. With the termination of the offering, no shares of common stock will be sold by SFS at this time. Instead, the company intends to accelerate its previously announced buyback program and defer its plans to increase public float to a later date.

PreMarket Prep Take: The indecisiveness of the company’s top brass coupled with the recent price action prompted co-host Dennis Dick to tweet "gift rally. Just my opinion."

Price Action: After a much higher open ($6.69 versus $5.52), UWMC rallied to $7.03 (where it began the week) and sharply reversed course. As of 1:45 p.m. EST, it has continued to make new lows for the session, with the current one being at $6.44. In order to fill the void in price from last night’s news, the issue would need to fall to $6.03.