Class Action Lawsuit Alleges Board Disloyalty and Misleading Proxy in CrossCountry Merger
Summary
Two Harbors faces an amended class action lawsuit alleging its board prioritized management's financial interests over shareholders' by favoring a lower merger bid and using misleading proxy statements.
Key Events
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Amended Class Action Lawsuit Filed
A class action lawsuit was amended on June 12, 2026, adding a new claim for breach of duty of loyalty against the Board and asserting that proxy statements for the CrossCountry merger are materially misleading.
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Allegations of Board Disloyalty
The lawsuit claims the Board favored CrossCountry's $12.00/share offer over UWMC's $12.50/share bid to ensure immediate cash payouts of approximately $33.8 million for management and to protect their employment.
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"Weaponized" Termination Fee
The plaintiff alleges the Board structured the merger agreement with a termination fee of approximately $76.4 million specifically targeting UWMC, while other bidders would face a lower $51 million fee, effectively tripling the cost for the higher bidder.
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Shareholder Vote Postponed Amidst Opposition
The special meeting for the merger vote has been repeatedly postponed, now to June 23, 2026, amidst shareholder resistance and adverse recommendations from proxy advisory firms ISS and Glass Lewis.
Analysis
This filing reveals an amended class action lawsuit against Two Harbors and its directors, alleging breach of fiduciary duty and materially misleading proxy statements related to the proposed acquisition by CrossCountry Mortgage. The lawsuit claims the Board favored a lower-priced offer from CrossCountry ($12.00/share) over a higher one from UWMC ($12.50/share) to secure immediate cash payouts for management and preserve their jobs. It also highlights a "weaponized" termination fee structure designed to deter UWMC and notes that independent proxy advisors have recommended against the CrossCountry merger. This legal challenge introduces significant uncertainty to the merger's completion and could lead to its termination or renegotiation.
At the time of this filing, TWO was trading at $12.24 on NYSE in the Real Estate & Construction sector, with a market capitalization of approximately $1.3B. The 52-week trading range was $8.78 to $14.17. This filing was assessed with negative market sentiment and an importance score of 9 out of 10.