Gores Holdings IV, Inc.

GHIV Details

Business Combination with UMW: Gores Holdings IV, Inc. (NASDAQ: GHIV) is a special purpose acquisition company formed to create a merger, acquisition, or similar business combination. On 23 September 2020, the company had announced that it has entered into a definitive agreement with United Wholesale Mortgage (UMW) for a business combination. The transaction values UWM at approximately $16.1 billion, making it the largest special purpose acquisition company transaction to date. UMW will use the proceeds to ramp up the implementation of its business plan focused on providing superior service to its broker-clients and capitalizing on growth opportunities. GHIV is planning to hold a special stockholder meeting on 20 January 2021 to approve the business combination.

UMW Quarterly Result Highlights: For Q3FY20, UMW reported $54.2 billion in loan volume, representing a YoY growth of 81%. Further, UMW reported a net income of $1.45 billion, significantly higher than $198 million in pcp. Over the quarter, UMW introduced UWM InTouch, a mobile app that provides brokers access to the full origination process and it also launched Blink+, an all-in-one online borrower-facing application portal.

Outlook: Looking ahead, UMW expects its net revenue to grow to $5.35 billion by 2022. UMW’s pro-forma net income is expected to be around $1.76 million in 2022. On 9 November 2020, UMW announced its intention to adopt a policy of issuing a regular annual dividend of $0.40 per share as part of its capital allocation strategy, demonstrating the company’s steadfast commitment to creating value for its stockholders.

Result Projections (Source: Company Reports)

Key Risks: The business of UMW is exposed to the risks related to the changes in the macroeconomic and U.S. residential real estate market conditions, including changes in U.S. monetary policies that affect interest rates. UMS is also exposed to the risks arising from the reliance on its proprietary technology to manage and grow its business. Notably, UMW is also exposed to competition risks as there is intense competition in the mortgage industry.

Stock Recommendation: The stock of GHIV has provided a return of 9.1% in the past one month. The stock has a 52-weeks low and high price of $9.30 and $11.83, respectively. On the technical analysis front, the stock has a support level of ~$10.505 and resistance of ~$11.67. Considering the anticipated benefits from the business combination, UMW’s decent performance in Q3FY20, expected growth in revenue and net income, its capital allocation strategy and associated key risks, we give a “Speculative Buy” recommendation on the stock at the closing price of $10.98, up by 2.43% on 21 December 2020.

GHIV Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

GigCapital2, Inc.

GIX Details

Signs Business Combination Agreements: GigCapital2, Inc. (NYSE: GIX) is a Private-to-Public Equity (PPE) company that offers financial, operational, and executive mentoring to U.S. and overseas private, and non-U.S. public companies. On 23 November 2020, the company entered into a business combination agreement with UpHealth Holdings, Inc. (UpHealth), and Cloudbreak Health, LLC, to form a combined company. The combined entity will be named UpHealth, Inc. and it will be listed on the NYSE under the new ticker symbol “UPH”. This transaction will improve the ability of Cloudbreak Health to power healthcare’s digital transformation and resolve disparities on a massive scale. The combined pro forma enterprise value is around $1.35 billion. The transaction is expected to close in Q1 2021, subject to the fulfilment of necessary conditions.

On 8 December 2020, GIX held its annual meeting of stockholders, wherein, all the matters put forward before its stockholders for consideration were approved.

Outlook: UpHealth is a global digital healthcare company that provides single, integrated platform of best-in-class technologies and tech-enabled services essential to personalized, affordable, and effective care. Following the combination, UpHealth will be placed for predictable growth and profitability enabling substantial reinvestment opportunities. It is expected that UpHealth will generate over $190 million in revenue and $24 million in EBITDA in 2021. Notably, 69% of the 2021 incremental revenue growth is already contracted.

Revenue and EBITDA Estimates (Source: Company Reports)

Key Risks: GIX is exposed to the risks related to the uncertainty of the projected financial information with respect to UpHealth and Cloudbreak. Being an international digital healthcare provider, UpHealth is exposed to the risk related to the change in the Government policies of foreign countries. In addition, UpHealth is also exposed to the risk related to the change in the technology.

Stock Recommendation: The stock of GIX has provided a return of 3.96% in the past three months. The stocks’ 52-week low and high stands at $9.60 and $12.12, respectively. On the technical analysis front, the stock has a support level of ~$10.08 and resistance of ~$11.10. Considering the aforesaid facts, anticipated benefits from the proposed business combination with UpHealth and Cloudbreak, expected revenue and EBITDA growth of UpHealth, and key investment risks, we give a “Speculative Buy” recommendation on the stock at the closing price of $10.49, up by 1.45% as on 21 December 2020.

GIX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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