Two Harbors stockholder sues to block CCM merger vote

A Two Harbors Investment Corp. stockholder has sued the company and its directors in federal court over allegedly misleading proxy disclosures, seeking a restraining order to delay the May 19 special meeting regarding its proposed merger with CrossCountry Intermediate Holdco LLC.

George Assad filed the lawsuit and related emergency motions Wednesday in the U.S. District Court for the District of Maryland. He claims Two Harbors and its directors violated Securities and Exchange Commission (SEC) rules and the Securities Exchange Act of 1934 by disseminating a materially incomplete and misleading proxy statement for the CrossCountry Mortgage (CCM) deal. This is the second case involving a shareholder against Two Harbors over the M&A proposal.

The lawsuit heavily references a May 6 earnings call with United Wholesale Mortgage (UWM) CEO Mat Ishbia, who publicly accused Two Harbors management of steering the deal to CCM to protect their own jobs and compensation rather than negotiating with UWM.

“It’s very clear that their management team and their board … is maybe playing some games, doing things because they realize that we don’t see any value for them specifically,” Ishbia said. “We’ll see how it shakes out for us.” 

The complaint alleges the CCM deal structure ensures approximately $35 million in immediate management payouts at closing — far exceeding the proxy’s disclosed golden-parachute figures. It also criticizes the board for doubling the termination fee payable to CCM from $25.4 million to $50 million.

“None of these facts — management entrenchment, the Board’s refusal to engage with UWMC, the economic illogic of doubling a termination fee to reward a matching bid offering no additional value, the Board’s repetition of the bare-match pattern on May 8, 2026, or the approximately $35 million in immediate management payouts UWMC has publicly identified as the deal-protective feature driving the Board’s choice — were disclosed,” the lawsuit states. 

Instead, the suit claims the proxy presents the board’s rejection of UWM and the doubled termination fee as “ordinary, value-maximizing exercises of business judgment.”

Two Harbors and its directors countered that they “believe that the Assad Complaint and the Assad Motion are without merit and that no supplemental disclosures are required under applicable laws.” 

To avoid delaying the merger and to minimize litigation expenses, Two Harbors voluntarily filed a proxy supplement acknowledging the complaint and UWM’s recent proxy filing, doing so without admitting liability or wrongdoing. The company emphasized the disclosure was provided “solely to eliminate the burden and expense of further litigation” and to put the claims to rest.

Assad is seeking to block the May 19 vote until the defendants issue corrective disclosures, giving stockholders at least 10 business days to review them. He is also seeking a rescission of the CCM merger and rescissory damages if the deal closes before a final judgment.

An initial status conference is scheduled for Friday at 2 p.m. ET, with a hearing on the restraining order set for May 18 at 10 a.m. ET.