Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
As previously reported, on January 21, 2021, Gores Holdings IV, Inc. (“Gores IV” and after the Business Combination described herein, the “Company”), consummated the business combination (the “Business Combination”) in which United Wholesale Mortgage, LLC became an indirect subsidiary of Gores IV and in which Gores IV changed its name to UWM Holdings Corporation.
On April 12, 2021, the U.S. Securities and Exchange Commission (the “SEC”) issued a statement (the “Statement”) on the accounting and reporting considerations for warrants issued by special purpose acquisition companies (“SPACs”). The Statement referenced the guidance included in U.S. Generally Accepted Accounting Principles that entities must consider in determining whether to classify contracts that may be settled in its own stock, such as warrants, as equity or as an asset or liability. The Statement discussed “certain features of warrants issued in SPAC transactions” that “may be common across many entities.” The Statement indicated that when one or more of such features is included in a warrant, the warrant “should be classified as a liability measured at fair value, with changes in fair value each period reported in earnings.”
In connection with the preparation of the Company’s financial statements for the quarterly period ended March 31, 2021 (the “Q1 2021 Financial Statements”), the Company determined that, considering the guidance in the SEC Statement, the Company’s private placement warrants and public warrants (collectively, the “Warrants”) originally issued in connection with Gores IV’s initial public offering in January 2020 should be classified as a liability and marked to fair value each reporting period, rather than equity as originally classified. As of December 31, 2020, there were 10,625,000 public warrants outstanding and 5,250,000 private placement warrants outstanding. For a full description of the Warrants, please refer to the Description of Securities included in Exhibit 4.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 22, 2021 (the “2020 Form 10-K”). Also in connection with the preparation of the Q1 2021 Financial Statements, the Company determined that the accounting for the Company’s redeemable common stock issued in connection with Gores IV’s initial public offering in January 2020 did not appropriately consider the guidance in U.S. Generally Accepted Accounting Principles which precludes reducing the redeemable common stock balance below its carrying value upon initial recognition, and requires redeemable common stock to be subsequently measured at its maximum redemption value when it is probable that the redeemable common stock will become redeemable. In connection with the consummation of the Business Combination, Gores IV redeemed 20,795 shares for $208,113, and the common stock is no longer redeemable. These errors had no impact on the amount held by Gores IV for redemption in the Trust Account.
On May 12, 2021, the Company’s Audit Committee, in response to the Statement and after discussion with the Company’s legal advisors, determined that, consistent with the Company’s determination in connection with the preparation of the Q1 2021 Financial Statements, the Warrants were incorrectly classified as equity and the redeemable common stock was incorrectly measured in the previously issued financial statements of Gores IV as of December 31, 2020 and for the year ended December 31, 2020 (the “Gores IV 2020 Financial Statements”) included in the Company’s 2020 Form 10-K and Registration Statement on Form S-1 (Registration No. 333-252422) should no longer be relied upon.
Accordingly, investors and others should not rely on the Company’s previously released financial statements and other financial information and disclosures relating to the Gores IV 2020 Financial Statements. Similarly, any previously furnished or filed reports, press releases, earnings releases, investor presentations or other communications describing the Gores IV 2020 Financial Statements should no longer be relied upon.
The Company’s Audit Committee or an authorized officer has discussed the matters disclosed in this Item 4.02(a) filed on Form 8-K with the Company’s independent registered public accounting firm.
The historical audited financial statements of United Wholesale Mortgage, LLC included as Exhibit 99.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on March 22, 2021, which replace the Gores IV 2020 Financial Statements (as predecessor of the Company) in future Company filings, are not affected by the SEC Statement or the accounting for redeemable common stock.