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United Wholesale Mortgage is about to go public via the largest blank-check deal to date. CEO Mat Ishbia explains how he went from knowing zero about SPACs to a $16 billion valuation in just 9 months.

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Mat Ishbia United Wholesale Mortgage President and CEO Mat Ishbia.

  • United Wholesale Mortgage goes public on Friday in a $16 billion SPAC deal, the largest ever.
  • SPACs are shell companies that raise money to buy or merge with private firms to take them public.
  • UWM president and CEO Mat Ishbia told Insider a meeting with private-equity mogul Alec Gores in April of 2020 helped spur the development of a relationship that led to the SPAC deal.
  • Visit Business Insider’s homepage for more stories.

Executives often spend years thinking and debating their company’s arrival to the public markets. The decision represents a seminal point in their career.

For United Wholesale Mortgage President and CEO Mat Ishbia, choosing how to bring the nation’s largest wholesale mortgage lender to the public markets was an entirely new challenge, especially as he began to consider a non-traditional route to going public.

In September, UWM announced it would go public via a merger with Gores Holdings IV, a special purpose acquisition company, or SPAC.

“I didn’t even know what a SPAC was before April,” Ishbia told Insider in December.

See more: These are the big winners of the year of the SPAC

As a relative newcomer to the SPAC space, Ishbia isn’t alone. The surge in blank-check dealmaking that defined 2020 was once considered a last – not a first – option for companies entering public markets.

Market volatility over the past year and a desire for companies to go public quickly has led to the rise in SPAC deals since the COVID-19 pandemic began.

On Friday, UWM and Gore Holdings IV, which was launched a year ago by private-equity mogul Alec Gores, will merge to take the nation’s largest wholesale mortgage lender public at a valuation of $16.1 billion, representing the largest-ever SPAC deal.

As a wholesale lender, UWM provides the cash to finance mortgages to a network of brokers across the country instead of signing home loans directly.

Ishbia said a meeting with Gores in April of 2020 helped spur the development of a relationship that led to the SPAC closing. It began a partnership that would ultimately lead to the largest SPAC deal in history. 

“I’m only going public once in my life,” Ishbia said. “I’d much rather have someone that’s done this before, that can help guide me and mentor me through this process.”

Going public, more efficiently

Ishbia, whose father founded United Shore, a retail lending brand and the original holding company of UWM, joined the mortgage lender in 2003.

As a college student, Ishbia was a walk-on for Michigan State’s men’s basketball team – a perennial powerhouse – where he won a national championship in 2000.

But he turned down a position coaching college basketball to join the family business. His first job, he said, “was taking faxes off the fax machine and walking them to the underwriter.”

Ultimately, Ishbia helped build the company from a regional competitor with 13 employees into a national lending giant that now employs more than 8,000 people. He became CEO in 2013.

In an interview with Insider in December, Ishbia detailed how early he gets into the office each day (4:00 am) and what he looks for in new employees (“a great work ethic and attitude.”)

When it came time to go public, Ishbia said he appreciated the simplicity of a SPAC deal relative to a traditional initial public offering, which typically involves months of groundwork laid by banks, from the roadshow to the setting of a listing price in consultation with key investors. It’s a process that’s also been turned upside down by the COVID-19 pandemic over the past year.

“I looked at both the IPO and SPAC, and really the SPAC just seemed more efficient to me – not less time necessarily – just more efficient and a little bit more structured than the IPO,” Ishbia said.

See more: The CEO of United Wholesale Mortgage reveals why he deliberately over-hires, spends months training new staffers, and just made every employee a shareholder

It was a desire for efficiency that was only heightened by COVID-19, Ishbia said, with many of his team members working from home.

“It wasn’t like I have all day to focus on IPOs and proxies and all these different things,” he added.

“Of course I have investment bankers. And of course I have a team of people here that focus on it, but this is not a ‘Let’s go public and sell sunshine and roses.’ It was like, ‘We’re really running a really important business, and I can sell all these great things.’ And if our business doesn’t make a lot of money, it doesn’t perform like I say it’s going to be, none of it works,” Ishbia said.

SPACs reign supreme

In 2020, 248 companies raised more than $83 billion through deals facilitated by SPACs, according to the website SPAC Research. It’s a trend that is only set to continue, with Goldman Sachs estimating SPACs could drive $300 billion in mergers and acquisitions activity over the next two years.

Publicly-traded SPACs are referred to as blank-check companies because they raise money from investors with the express intention of buying or merging with another business. While some SPACs are focused on specific industries, investors usually don’t initially know the company that will be acquired by the SPAC.

After raising funds, SPACs go public despite not having an actual operating business. They then have a set amount of time – usually two years – to get a deal done, or they are required to return all money to investors.

When a SPAC merges with a company, the latter is taken public, all without the fanfare and roadshow of a traditional IPO. 

Read more: What’s a SPAC? Inside the unstoppable rise of ‘blank-check companies,’ the IPO alternative that startups and VCs are piling into.

Gores is no stranger to the SPAC business. The Gores Group’s first blank-check deal in 2016 took Hostess Brands public at a valuation of around $2.3 billion. And in December, a Gores-backed SPAC merged with Luminar Technologies, a software company that designs sensors for autonomous cars, to take the company public at a valuation just shy of $3 billion.

Gores Holding IV raised $425 million upon its launch in January of 2020, cash that will be combined with a $500 million private placement when it merges with UWM. The private investors have not been disclosed.

“From our very first meeting with Mat, we immediately recognized his compelling leadership style and incredible motivation – these qualities have clearly played a large role in UWM’s tremendous success. UWM is approaching a major milestone and we’re confident that with Mat’s leadership, UWM is well-positioned for success as a public company,” Gores wrote in a statement to Insider.

‘Liquidity is king’

UWM will go public after a banner year for home refinancing in 2020. Spurred by a crash in mortgage rates brought on by the pandemic, some brokers faced capacity issues as they scrambled to handle the increased volume.

Ishbia said the impetus to take UWM public stemmed from a desire to engage more competitively with other top lenders that are already public, such as Wells Fargo, JPMorgan Chase, and Rocket Companies.

“We realized from a business perspective, liquidity is king. Let’s put us on a level playing field with Rocket and Wells and Chase, the three other top lenders in the country,” Ishbia said.

In August, Rocket Mortgage raised $1.8 billion in a traditional public offering, but saw its target IPO price range set below initial estimates that valued the company higher earlier in the summer.

In an interview with CNBC in September when the SPAC deal was first announced, Ishbia said the cash raised by going public would further boost UWM’s technology spending, increasing how quickly and efficiently it can process mortgages. 

Ishbia said tech has always been a big area of investment for UWM, and it’s paid off. As of the third quarter of 2020, UWM was on pace to surpass $200 billion in mortgage volume for the year, placing it only behind Rocket Mortgage in the amount of home loans brokered in the US.

The terms of the merger between Gores Holdings and UWM will make Ishbia an overnight billionaire worth $11.4 billion, as calculated by Bloomberg. Current UWM ownership will retain a 94% ownership in the $16 billion company, according to SEC filings. Gores Holdings and the other investors participating privately will control the remaining 6%.

UWM’s planned arrival to the public markets also led to good news at the company’s 2020 holiday party. It was there Ishbia announced UWM employees would receive a total of $35 million in shares upon the company going public, with a minimum of $1,000 in shares going to each employee.

The employee stock-sharing program was the idea of “our whole leadership team,” said Ishbia.

“I mean, we all talk about a family company,” Ishbia said. “How do I truly make it a family company? I say, well, we all win together.