Ishbia pledged UWM shares worth $4.6 billion ahead of NBA deal

Mat Ishbia, the new owner of the Phoenix Suns, pledged more than half of mortgage giant UWM Holdings Corp.'s outstanding shares to secure loans before buying the NBA team for a record $4 billion.

Ishbia, UWM's chairman and chief executive officer, pledged stock he controls currently worth about $4.6 billion to back two loans that were finalized days before his purchase of the Suns was approved. 

He holds his stake through SFS Holding Corp., which owns 94% of UWM's outstanding stock and pledged the shares, according to the firm's 2023 proxy statement. Other investors in SFS include his brother Justin, managing partner of Shore Capital who bought a stake in the team alongside Mat. 

A spokesperson for Pontiac, Michigan-based UWM didn't respond to an email and voicemail seeking comment. 

Ishbia, 43, a former walk-on basketball player at Michigan State University, is worth $5.5 billion, according to the Bloomberg Billionaires Index. His fortune dropped by $3.4 billion after the pledged shares were removed from his net worth calculation.

Ishbia agreed to purchase a majority stake in the National Basketball Association franchise in December from Robert Sarver after the league found Sarver had engaged in racist and sexist behavior. The deal, which was approved in February, involves more than 50% ownership of the Suns and the WNBA's Mercury.

SFS pledged 805 million shares to secure the two loans, slightly more than half of UWM's outstanding stock. JPMorgan Chase & Co. was the lender on both deals, according to public records. The loan sizes weren't disclosed. 

A JPMorgan spokesperson declined to comment.

Musk, Icahn

It isn't unusual for executives of publicly traded companies to pledge shares as collateral, with founders including Tesla Inc.'s Elon Musk, Danaher Corp.'s Mitchell Rales and Softbank's Masayoshi Son all having done so. What is unusual is the scope of Ishbia's loans, with more than half his shares now tied up as collateral. 

Margin loans involve lending that's collateralized by the value of the underlying shares. Typically, if the value of the stock declines lenders can request additional collateral or for the loan to be repaid. If the borrower fails to comply, the lender can seize and sell the shares.

A margin loan taken out by Carl Icahn was highlighted in a report this year by short-seller Hindenburg Research into Icahn Enterprises LP, the billionaire's investment firm. Icahn had pledged about 60% of his holdings to secure the loan, equivalent to about half of the company's outstanding shares. Hindenburg criticized Icahn for failing to disclose how much he'd borrowed, the interest rate or the loan-to-value maintenance ratio associated with the debt. 

Two months after Hindenburg's report, and after Icahn Enterprises' share price had fallen by more than a third, Icahn renegotiated his loans so that he couldn't be margin-called based on the market price. 

UWM went public in a merger with a special purpose acquisition company in January 2021 at a roughly $16 billion valuation. The company's shares have climbed 71% this year, but are still down more than 50% from their merger price.