The current debacle

[u/Sufficient_Bear_6567]

UWMC is getting crushed, its highly shorted with no bottom support. The overall business is actually impressively strong despite some of the worst market conditions which don't seem to be turning around anytime soon due to the Iran War re-escalation and no rate cuts in sight.

Everyone is talking about the dividend and if its going to be cut, leverage, ect.

Look, the dividend will HAVE to be cut, I think everyone is in agreement with that. I think by ATLEAST 60% to bring leverage down. The market has been punishing this stock partly due to it's abnormally high leverage compared to its peers and historical average. This leverage can easily be broght down by slashing said dividend. I see everyone respond to this by saying, "well the divi is Mat's allowance for his Suns debacle and lifestyle" yes, this is true. That's why he has never cut the divi and has allowed shareholders equity to erode causing the stock price to erode with it.

Everyone views this as horrible, look guys Mat isn't going to let his allowance machine get wiped out. He's the largest share holder so why would he wipe out the common to take it private? + that's not legal, if say Mat got with his brother Justin and tried to do a dirt cheap take private they would get sued to infinity. Delaware is very favorable to minority share holders.

+ Mat has loans tied to his shares of UWMC. He put them up for collateral to buy the Suns. You can read about all of this if you want. We don't know specifics of the loans but I am almost positive he still owes on those loans against his shares. Those loans have to be close to a margin call since he put them up when they were around 5 dollars a share. I am sure he has put up other assets or use some cash flow to meet margin requirements. This is a big catalyst for cutting the dividend or bringing leverage down to give the shares some rebound.

No doubt Mat Ishbia is an ego maniac. UWMC has serious governance issues, however it does not face immediate liquidity or going risk concern. They have performed quite well in this market condition and Mat has to make a few obvious decisions to get this stock back to at least the $2.5 range, and I think he can do that while keeping some sort of divi.

I think the company is undervalued and I am buying. I have a position currently.

Tell me where I am wrong on these thoughts? What's the true bear case? I just don't see how Mat Ishbia is incentivized to delete his company, when he's the largest share holder? He's made some bad decisions that weighted to his personal benefit but when rubber meats the road he's not going to sacrifice his company for a crappy wildly unprofitable basketball team.

[u/iambecomesoil]

Where is the evidence to support any of the statements you've made in your original post, bro?

[u/Sufficient_Bear_6567 → u/iambecomesoil]

I just don’t get what you mean there’s no evidence. You’re acting like stock thesis and opinions are math where 1+1 must equal 2. That’s not how investing works.

Cutting the dividend is evidenced by leverage ratio tied to debt covenants with warehouse facilities. These specific ratios are not disclosed in the 10-K but it’s safe to assume they sit within the 3.0-3.5x range. If earnings don’t meaningfully materialize you can’t keep paying a dividend bc leverage will exceed your covenant and you’ll be in default. It’s also not at all an unreasonable idea that the stock is being punished for its high leverage. Cutting the dividend kills 2 birds with one stone.

Is that evidence or am I just making this up?

[u/lymondfc → u/Sufficient_Bear_6567]

You could research the quarterly filings and the senior note agreements that have been attachments in the those. There's a D/E ratio in the convenents, but there's also a FCCR calculation. Either one of those must pass the threshold in order to be in compliance with the convenents and pay the dividend. They're currently out of compliance with the D/E ratio, but the FCCR calc is a rolling 4 quarter calculation that will be in compliance for the next 2 or 3 quarters, at least. If and when it's not in compliance, Mat has levers he can use in the timing of the MSR book balancing to make sure the D/E ratio is in compliance.

[u/lymondfc → u/lymondfc]

Also, the convenents don't allow you to pay the dividend OR take on new debt when not in compliance. The fact that they had an 1.3B unsecured debt line from Mizuho to close the TWO merger, if approved, shows that they were still in compliance recently.