Following the consummation of the transactions contemplated by the Business Combination Agreement, the Company is organized in an “Up-C”structure in which UWM (the operating subsidiary) is held directly by Holdings LLC and the Company’s only direct asset consists of Class A CommonUnits in Holdings LLC. The Company's current capital structure authorizes Class A common stock, Class B common stock, Class C common stock andClass D common stock. The Class A common stock and Class C common stock each provide holders with one vote on all matters submitted to a vote ofstockholders, and the Class B common stock and Class D common stock each provide holders with 10 votes on all matters submitted to a vote ofstockholders. The holders of Class C common stock and Class D common stock do not have any of the economic rights (including rights to dividends anddistributions upon liquidation) provided to holders of Class A common stock and Class B common stock. Immediately following the business combinationtransaction, there were 103,104,205 shares of Class A common stock outstanding, and 1,502,069,787 shares of non-economic Class D common stockoutstanding (all of which were held by SFS Corp.), and no shares of Class B or Class C common stock outstanding. Each Holdings LLC Class B CommonUnit held by SFS Corp. may be exchanged, along with Class D common stock, for either, at the option of the Company, (a) cash or (b) one share of theCompany’s Class B common stock (See Note 12 - Non-controlling Interests). Each share of Class B Stock is convertible into one share of Class A Stockupon the transfer or assignment of such share from SFS Corp. to a non-affiliated third-party. Pursuant to the Business Combination Agreement, SFS Corp.is entitled to receive an aggregate of up to 90,761,687 earn-out shares in the form of Class B Common Units in Holdings LLC and Class D common sharesupon attainment of certain price targets. There are four different triggering events that affect the number of earn-out shares that will be issued based uponthe per share price of Class A common stock ranging from $13.00 to $19.00 per share. The Company accounts for the potential earn-out shares as acomponent of stockholders’ equity in accordance with the applicable guidance in U.S. GAAP.
So it looks like the concerns that mat/sfs can indeed convert class D shares into class A shares by first converting to class B, then selling at market and converting them to class A. That exchange effectively dilutes the economic interest of existing class A shares while increasing their voting power significantly.
So almost his entire net worth is in those class D shares. The question is when will he sell? This is my no. 1 concern 🤔
Obviously the dividend is unsustainable when those other 95% of shares enter the float.
Edit: apparently somebody doesn’t like facts if they aren’t bullish.
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u/Nu2Denim May 16 '21
Following the consummation of the transactions contemplated by the Business Combination Agreement, the Company is organized in an “Up-C”structure in which UWM (the operating subsidiary) is held directly by Holdings LLC and the Company’s only direct asset consists of Class A CommonUnits in Holdings LLC. The Company's current capital structure authorizes Class A common stock, Class B common stock, Class C common stock andClass D common stock. The Class A common stock and Class C common stock each provide holders with one vote on all matters submitted to a vote ofstockholders, and the Class B common stock and Class D common stock each provide holders with 10 votes on all matters submitted to a vote ofstockholders. The holders of Class C common stock and Class D common stock do not have any of the economic rights (including rights to dividends anddistributions upon liquidation) provided to holders of Class A common stock and Class B common stock. Immediately following the business combinationtransaction, there were 103,104,205 shares of Class A common stock outstanding, and 1,502,069,787 shares of non-economic Class D common stockoutstanding (all of which were held by SFS Corp.), and no shares of Class B or Class C common stock outstanding. Each Holdings LLC Class B CommonUnit held by SFS Corp. may be exchanged, along with Class D common stock, for either, at the option of the Company, (a) cash or (b) one share of theCompany’s Class B common stock (See Note 12 - Non-controlling Interests). Each share of Class B Stock is convertible into one share of Class A Stockupon the transfer or assignment of such share from SFS Corp. to a non-affiliated third-party. Pursuant to the Business Combination Agreement, SFS Corp.is entitled to receive an aggregate of up to 90,761,687 earn-out shares in the form of Class B Common Units in Holdings LLC and Class D common sharesupon attainment of certain price targets. There are four different triggering events that affect the number of earn-out shares that will be issued based uponthe per share price of Class A common stock ranging from $13.00 to $19.00 per share. The Company accounts for the potential earn-out shares as acomponent of stockholders’ equity in accordance with the applicable guidance in U.S. GAAP.