UBS has shifted its stance on Two Harbors Investment (NYSE:TWO), changing its rating to Neutral from Buy and elevating the price target to $14.00 from $11.00. This change is a direct response to the recent acquisition news involving the mortgage real estate investment trust (REIT), which currently offers an attractive dividend yield of 10.14% and has sustained dividend payments for 18 consecutive years.
The announcement came after United Wholesale Mortgage Holdings (UWMC) revealed its intention on December 17, 2025, to acquire Two Harbors Investment through an all-stock deal valued at approximately $1.3 billion. This transaction is structured based on an exchange ratio of 2.3328 shares of UWM Class A Common Stock for every share of Two Harbors, and it is anticipated to finalize in the second quarter of 2026.
UBS identified the transaction terms as the principal factor behind adjusting their evaluation of Two Harbors, leading to the revised Neutral rating while simultaneously raising the price target by $3.00. This updated price target reflects UBS’s recalibrated perspective following the acquisition announcement.
Additionally, Two Harbors Investment reported a significant unexpected loss during its third quarter fiscal 2025 earnings call, posting an earnings per share (EPS) of -$1.36 compared to analysts' expectations of $0.35. The comprehensive loss was $80.2 million, equating to a loss of $0.77 per share. Despite this financial setback, the announcement of the acquisition deal offered a 21% premium over Two Harbors’ 30-day volume-weighted average price, which has contributed to a 37.6% rise in its stock over the preceding six months.
The acquisition by UWM Holdings Corporation is expected to bring operational and strategic changes, with shareholders receiving UWM stock in exchange for their Two Harbors shares under the specified ratio. This aligns with the company’s aim to create long-term value through consolidation.
These developments primarily impact the financial sector, particularly within the mortgage REIT and mortgage finance markets. The merger could lead to shifts in market dynamics, influencing investor sentiment and competitive positioning among entities within the mortgage lending and investment landscape.