The risks described below could materially and adversely affect our business, financial condition, and results of operations. These risks are not the only risks that we face. Our business operations could also be affected by additional factors that apply to all companies operating in the United States and globally, as well as other risks that are not presently known to us or that we currently consider to be immaterial.

Risks Related to Our Business

WMIH and its subsidiaries have limited operations; WMIH is a holding company, and its only material assets are cash on hand, cash held in trust, restricted cash and its equity interests in its operating subsidiary and its other investments, and WMIH’s principal source of revenue and cash flow are distributions and certain payments from our wholly-owned subsidiary, WMMRC, which is operating in runoff mode and is subject to restrictions from paying us dividends and investment income from our investment portfolio.

As a holding company, our only material assets are our cash on hand, cash held in trust, restricted cash, the equity interests in WMMRC and other investments. As of December 31, 2017, WMIH had no operations other than WMMRC’s legacy reinsurance business with respect to mortgage insurance which is being operated in runoff mode and activities related to identifying and consummating an acquisition. WMMRC has not written any new business since September 26, 2008. As of December 31, 2017, excluding restricted cash and assets held in trust, we had approximately $28.9 million in cash, cash equivalents, and investments, which includes $7.6 million held by our wholly-owned subsidiary, WMMRC. Prior to consummating a Qualified Acquisition, we expect that our principal source of revenue and cash flow will be investment income from our investment portfolio, if any, cash and cash equivalents on hand, distributions from our operating subsidiary, if any, and certain payments made to us by WMMRC pursuant to the Administrative Services Agreement, dated as of March 19, 2012, between WMIH and WMMRC (the “Administrative Services Agreement”) and the Investment Management Agreement, dated as of March 19, 2012, between WMIH and WMMRC (the “Investment Management Agreement”). WMMRC is restricted by insurance law from making distributions to WMIH unless prior approval is obtained from the Insurance Division of the State of Hawaii. Thus, our current ability to fund our operations, including costs associated with the Nationstar Transaction, or if the Nationstar Transaction does not close, costs associated with identifying, evaluating, negotiating and closing other potential acquisition opportunities is dependent on (i) the ability of our operating subsidiary to generate sufficient net income and cash flows to make upstream cash distributions to us, and (ii) our ability to obtain access to the funds held in escrow from the Series B Preferred Stock Financing. Any future subsidiaries will be separate legal entities, and although they may be wholly-owned or controlled by us, they will have no obligation to make any funds available to us, whether in the form of loans, dividends, distributions or otherwise. The ability of our operating subsidiary to distribute cash to us is also subject to, among other things, availability of sufficient funds and applicable state laws and regulatory restrictions. Claims of creditors of any subsidiaries generally have priority as to the assets of such subsidiaries over our claims and claims of our creditors and stockholders. To the extent our ability to access funds held in escrow from the Series B Preferred Stock Financing could be limited in any way, or the ability of our operating subsidiary to distribute dividends or other payments to us could be limited in any way, such limitations could materially limit our ability to grow, pursue business opportunities or make acquisitions that could be beneficial to our businesses, fund and conduct our business, or fund redemptions or repurchases.

If we are unable to consummate the Nationstar Transaction or identify and/or complete another Acquisition or there are delays in finding suitable acquisition targets or the Nationstar Transaction is not successful or any other Acquisitions that we may make are not successful, WMIH may never achieve sustained profitability, which would adversely affect the value of the Company.

If we are unable to consummate the Nationstar Transaction, we may not be able to identify or complete an alternative acquisition in a timely manner or at all and any delays we encounter in the selection, acquisition and/or development of other acquisition targets could adversely affect our value. WMIH’s inability to consummate the Nationstar Transaction or make one or more other suitable Acquisitions would impair WMIH’s ability to become profitable. If WMIH consummates the Nationstar Transaction or makes another Acquisition, we may fail to achieve profitability on a sustained basis which would adversely affect the value of the Company.  See “—Risk Factors Relating to the Pending Nationstar Transaction.”

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Until July 5, 2019, we are required to obtain prior consent from KKR Wand Holdings Corporation (“KKR Wand”) to enter into any definitive agreement with respect to any Acquisition.

Under a Letter Agreement (as amended, the “Letter Agreement”) with KKR Wand and KKR Wand Investors Corporation (“KKR Investors,” and together with KKR Wand, the “KKR Holders”), affiliates of KKR that hold Series A Convertible Preferred Stock (the “Series A Preferred Stock”), warrants to purchase common stock of WMIH, and Series B Preferred Stock, from December 8, 2017 through July 5, 2019,  WMIH is prohibited from entering into a definitive agreement with respect to any Acquisition without the prior written consent of KKR Wand; subject to a minimum stock ownership level by the KKR Holders, and their affiliates, and defined notice time periods which are detailed in the Letter Agreement. As a result, KKR Wand’s consent must be obtained prior to WMIH entering into a definitive agreement with respect to any Acquisition. KKR Wand has consented to the Nationstar Transaction; however, if we do not consummate the Nationstar Transaction, the failure or refusal of KKR Wand to provide its consent timely, or at all, and without conditions to another potential acquisition transaction may adversely impact our ability to successfully execute our acquisition strategy and complete an Acquisition.  There can be no assurance that we will be able to receive consent from KKR Wand with respect to any Acquisition or Qualified Acquisition other than the Nationstar Transaction.

A mandatory redemption of the Series B Preferred Stock would likely have a material adverse effect on our financial condition and business operations.

If we do not consummate the Nationstar Transaction or another Acquisition or Qualified Acquisition, on or prior to the Series B Redemption Date or take other actions to extend the redemption date applicable to, or to refinance or modify the terms of, the Series B Preferred Stock, then we will be obligated to redeem any outstanding Series B Preferred Stock on the Series B Redemption Date.   The execution and public announcement by WMIH of the Merger Agreement has extended the Series B Redemption Date to the earlier of April 5, 2020 and the day immediately following the date the Merger Agreement is terminated or the date the Merger is closed. All or a portion of the Series B Preferred Stock automatically converts into WMIH Common Stock upon consummation of a Qualified Acquisition (including the Nationstar Transaction) or an Acquisition, as the case may be. If an Acquisition occurs but a Qualified Acquisition does not occur, we are obligated to redeem any remaining portion of the Series B Preferred Stock that have not converted into WMIH Common Stock and remain outstanding on the Series B Redemption Date.  “Acquisition” means any acquisition by the Company (or any of its direct or indirect wholly-owned subsidiaries), in a single transaction or a series of transactions, whether by purchase, merger or otherwise, of all or substantially all of the assets of, or of 80% or more of the equity interests in, or a business line, unit or division of, any person. A “Qualified Acquisition” means an Acquisition that, taken together with prior Acquisitions (if any), collectively utilizes aggregate net proceeds of the Series B Preferred Stock Financing of $450.0 million.

There can be no assurances that we will be able to consummate the Nationstar Transaction or another Acquisition or Qualified Acquisition prior to the Series B Redemption Date. A mandatory redemption of the Series B Preferred Stock would substantially deplete our cash on hand to continue seeking acquisitions and would likely have a material adverse effect on our financial condition and business operations.  Relatedly, under those circumstances, we also may not have access to alternative sources of capital or liquidity.

WMIH, together with its subsidiaries, may not be able to fully utilize our net operating loss (“NOL”) and other tax carry forwards.

As of December 31, 2012, WMIH and its subsidiaries had U.S. federal NOLs of approximately $7.5 billion, of which approximately $6.0 billion was allocated to that portion of 2012 after the ownership change described below, that, if unused, will begin to expire in 2031. We believe that, as of December 31, 2017, WMIH and WMMRC had NOLs not subject to limitation under Section 382 (“Section 382”) of the United States Internal Revenue Code of 1986, as amended (the “Code”), of approximately $6.0 billion. Both WMIH and WMMRC caused 100% valuation allowances to be recorded against these deferred tax assets.

On the Effective Date, we believe that we experienced an “ownership change” within the meaning of Sections 382 and 383 of the Code. An ownership change is generally defined as a more than 50 percentage point collective increase in equity ownership by “5-percent shareholders” (as that term is defined for purposes of Sections 382 and 383 of the Code) in any rolling three-year period or since the last ownership change if such prior ownership change occurred within the prior three-year period. As a result of such ownership change on the Effective Date, the limitations on the use of pre-change losses and other carry forward tax attributes in Sections 382 and 383 of the Code apply and we will be able to utilize only a small portion of the NOL carry forwards from the years prior to 2012 and the portion of the NOL for 2012 allocable to the portion of the year prior to March 20, 2012. The utilization of the NOL for 2012 allocable to the portion of the year after the Effective Date and the NOLs from subsequent years should not be affected by the ownership change on the Effective Date.

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Our ability, including the ability of any subsidiary or subsidiaries acquired in any Acquisition, to utilize NOLs and other tax carry forwards to redu ce taxable income in future years could be limited for various reasons, including if projected future taxable income is insufficient to recognize the full benefit of such NOL carry forwards prior to their expiration and/or the Internal Revenue Service (“IR S”) challenges that a transaction or transactions were concluded with the principal purpose of evasion or avoidance of Federal income tax. There can be no assurance that we will have sufficient taxable income in later years to enable us to use the NOLs bef ore they expire, or that the IRS will not challenge the use of all or any portion of the NOLs.  Additionally, our ability (and the ability of any future subsidiary or subsidiaries) to fully use these tax assets could also be adversely affected if the respe ctive companies were deemed to have another “ownership change” within the meaning of Sections 382 and 383 of the Code. Although we have certain transfer restrictions in place under the Certificate of Incorporation, our Board of Directors could issue additi onal shares of stock or permit or effect future conversions, amendments or redemptions of our stock (including the Series B Preferred Stock), which, depending on their magnitude, could result in ownership changes that would trigger the imposition of additi onal limitations on the utilization of our NOLs under Sections 382 and 383 of the Code. Based on the price of WMIH’s common stock as of March 1, 2018, if all currently issued and outstanding Series B Preferred Stock are redeemed, we believe we would experi ence an “ownership change.” Accordingly, there can be no assurance that, in the future, WMIH and/or its subsidiary (and any future subsidiary) will be able to utilize its NOLs or not experience additional limitations on utilizing the tax benefits of their NOLs and other tax carry forwards. Such limitations could have a material adverse effect on WMIH’s and/or its subsidiary’s (or any future subsidiary’s) results of operations, cash flows or financial condition.

In an attempt to minimize the likelihood of an additional ownership change occurring, our Certificate of Incorporation contains transfer restrictions limiting the acquisition (and disposition) of our stock or any other instrument treated as stock for purposes of Section 382 by persons or group of persons treated as a single entity under Treasury Regulation Section 1.382-3 owning (actually or constructively), or who would own as a result of the transaction, 4.75% of the total value of our stock (including any other interests treated as stock for purposes of Section 382). Nevertheless, it is possible that we could undergo an additional ownership change, either by events within or outside of the control of our Board, e.g., indirect changes in the ownership of persons owning 5% of our stock. Moreover, approximately 1.5 million shares of WMIH’s common stock are held in escrow in an account known as the Disputed Equity Escrow. A subsequent release or transfer of the stock potentially could result in an ownership change of WMIH at that time.  In the event of a subsequent ownership change, all or part of the NOLs from 2012 and subsequent years that were not previously subject to limitations under Section 382 could also become subject to an annual limitation.

The IRS could challenge the amount, timing and/or use of our NOL carry forwards.

The amount of our NOL carry forwards has not been audited or otherwise validated by the IRS. Among other things, the IRS could challenge whether an ownership change occurred on the Effective Date, as well as the amount, the timing and/or our use of our NOLs. Any such challenge, if successful, could significantly limit our ability to utilize a portion or all of our NOL carry forwards. In addition, calculating whether an ownership change has occurred within the meaning of Section 382 is subject to inherent uncertainty, both because of the complexity of applying Section 382 and because of limitations on a publicly-traded company’s knowledge as to the ownership of, and transactions in, its securities. Therefore, the calculation of the amount of our utilizable NOL carry forwards could be changed as a result of a successful challenge by the IRS or as a result of new information about the ownership of, and transactions in, our securities.

We cannot fully predict the impact of recently enacted U.S. tax reform legislation on our NOLs, business or financial condition.

On December 22, 2017, H.R. 1, informally titled the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law.  The Tax Act makes major changes to the Code, and includes a number of provisions that affect the taxation of corporations, such as, among other things, lowering the corporate income tax rate from 35% to 21%, modifying the rules regarding limitations on certain deductions for executive compensation, introducing a capital investment deduction in certain circumstances, placing certain limitations on the interest deduction, modifying the rules regarding the usability of certain net operating losses arising in taxable years ending after December 31, 2017, and the migration from a worldwide system of taxation to a modified territorial system with corresponding measures to prevent base erosion. Given that our current deferred tax assets are offset by a full valuation allowance, we do not believe that the Tax Act would result in a net change to our financial statements, although if we become profitable, we will obtain a reduced benefit from such deferred tax assets. We continue to examine the impact that the Tax Act will have on us and our business. However, because at this time the overall impact of the Tax Act is unclear, the ultimate effect of the Tax Act on our business and financial condition is uncertain and could be adverse.

Possible changes in legislation could negatively affect our ability to use the tax benefits associated with our NOL carry forwards.

The rules relating to U.S. federal income taxation are periodically under review by persons involved in the legislative and administrative rulemaking processes, by the IRS and by the U.S. Department of the Treasury, resulting in revisions of regulations and revised interpretations of established concepts as well as statutory changes. Future revisions in U.S. federal tax laws and interpretations thereof could adversely impact our ability to use some or all of the tax benefits associated with our NOL carry forwards.

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Litigation against us could be costly and time consuming to defend.

We may from time to time be subject to legal proceedings and claims from third parties. Litigation may result in substantial costs and may divert our attention and WMIH resources, which may seriously harm our business, consolidated results of operations and consolidated financial condition.

An unfavorable judgment against us in any legal proceeding or claim could require us to pay monetary damages. In addition, an unfavorable judgment in which the counterparty is awarded equitable relief, such as an injunction, could have an adverse impact on our business, consolidated results of operations and consolidated financial condition.

Our limited staffing may curtail our ability to attain WMIH’s business objectives.

We have very limited staffing and management resources and are highly dependent on consultants and certain key employees. As of December 31, 2017, in addition to Messrs. Gallagher and Fairfield, the Company had two additional employees. WMIH’s Chief Legal Officer and Secretary, Charles Edward Smith, is an employee of the Trust, and our Interim Chief Financial Officer, Timothy F. Jaeger, is a self-employed consultant engaged by WMIH to provide financial reporting services.  Minimal staffing and any inability we may have to engage new executive officers or key employees in the event any of our executive officers or key employees terminates employment could have a material adverse impact on our operations or delay or curtail the attainment of WMIH’s objectives.

We are subject to regulation by various federal and state entities.

We are subject to the regulations of the SEC and the Insurance Division of the State of Hawaii. New regulations issued by these agencies may adversely affect our ability to carry on our business activities.

We are subject to various federal and state laws and certain changes in these laws and regulations may adversely affect our operations. Noncompliance with certain of these regulations may impact our business plans.

We are also subject to the accounting rules and regulations of the SEC and the Financial Accounting Standards Board as well as the listing rules and regulations of The Nasdaq Stock Market LLC. Changes in accounting rules could adversely affect the reported financial statements or our results of operations and may also require extraordinary efforts or additional costs to implement. Any of these laws or regulations may be modified or changed from time to time, and there is no assurance that such modifications or changes will not adversely affect us.

If we are deemed to be an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”), we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete an Acquisition.

If the nature of our operations or the assets on our balance sheet causes us to no longer be exempt from the definition of “investment company,” we may be deemed to be subject to the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete an Acquisition.

If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including restrictions on the nature of our investments and restrictions on the issuance of securities, each of which may make it difficult for us to complete an Acquisition. In addition, we may have imposed upon us burdensome requirements, including:

We do not believe that our principal activities subject us to the Investment Company Act. To this end, the proceeds from the issuance of the Series A Preferred Stock, the warrants to purchase WMIH Common Stock and the Series B Preferred Stock are only (i) held in cash or (ii) invested (a) in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 180 days or less or (b) in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act. By restricting the investment of the proceeds to these instruments, and by having a business objective of consummating one or more acquisitions of an operating business (rather than on buying and selling businesses in the manner of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company” within the meaning of the Investment Company Act. However, there can be no assurance that WMIH will not be deemed an investment company under the Investment Company Act.

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Business interruptions could limit our ability to operate our business.

Our operations, as well as others on which we depend, are vulnerable to damage or interruption from fire; natural disasters, including earthquakes; computer viruses; human error; power shortages; telecommunication failures; international acts of terror; and similar events. Our offices are located in Seattle, Washington and we currently obtain certain key services from the Trust pursuant to the TSA. The TSA, as amended, is currently in effect through June 30, 2018, with automatic renewals thereafter for successive additional three-month terms, subject to non-renewal at the end of any additional term upon written notice by either party at least 30 days prior to the expiration of the additional term.

Although we have certain business continuity plans in place, we have not established a formal comprehensive disaster recovery plan, and our back-up operations and business interruption insurance may not be adequate to compensate for losses we may suffer. A significant business interruption, including an unexpected non-renewal or termination of the TSA, could result in losses or damages incurred by us and require that we cease or curtail our operations.

Risks Related to Owning WMIH’s Stock

WMIH’s common stock, and any other instruments treated as stock for purposes of Section 382, including the Series A Preferred Stock and the Series B Preferred Stock, are subject to transfer restrictions under the Certificate of Incorporation, which if not complied with, could result in the forfeiture of such stock and related distributions.

Our Certificate of Incorporation contains significant transfer restrictions in relation to the transfer of WMIH’s common stock and any other instruments treated as stock for purposes of Section 382 (including the Series A Preferred Stock and the Series B Preferred Stock).  These transfer restrictions have been adopted in order to minimize the likelihood that we will be deemed to have an “ownership change” within the meaning of Section 382 that could limit our ability to utilize WMIH’s NOLs under and in accordance with regulations promulgated by the IRS.

In particular, without the approval of our Board, (i) no person or group of persons treated as a single entity under Treasury Regulation Section 1.382-3 will be permitted to acquire, whether directly or indirectly, and whether in one transaction or a series of related transactions, any of WMIH’s common stock or any other instrument treated as stock for purposes of Section 382, to the extent that after giving effect to such purported acquisition (a) the purported acquirer or any other person by reason of the purported acquirer’s acquisition would become a Substantial Holder (as defined below), or (b) the percentage stock ownership of a person that, prior to giving effect to the purported acquisition, is already a Substantial Holder would be increased; and (ii) no Substantial Holder may dispose, directly or indirectly, of any class of stock or any other instrument treated as stock for purposes of Section 382.  A “Substantial Holder” is a person that owns (as determined for purposes of Section 382) at least 4.75% of the total value of our stock, including any instrument treated as stock for purposes of Section 382.

Because of the complexity of applying Section 382, and because the determination of ownership for purposes of Section 382 does not correspond to SEC beneficial ownership reporting on Schedules 13D and 13G, holders and potential acquirers of WMIH securities should consult with their legal and tax advisors prior to making any acquisition or disposition of WMIH securities.  Pursuant to Article VIII of the Certificate of Incorporation, the Board has the sole power to determine compliance with the transfer restrictions and we cannot assure you that the Board will concur with any conclusions reached by any holder of WMIH securities or their respective advisors, and/or approve or ratify any proposed acquisitions or dispositions of WMIH securities.  Under Article VIII, Section 3(b), of the Certificate of Incorporation, if the Board determines that a Prohibited Transfer (as defined in the Certificate of Incorporation) has occurred, such Prohibited Transfer shall, to the fullest extent permitted by law, be void ab initio and have no legal effect, and upon written demand by WMIH, the Purported Transferee (as defined in the Certificate of Incorporation) shall disgorge or cause to be disgorged WMIH securities, together with any dividends or distributions received, with respect to such securities.

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Despite WMIH’s common stock being listed on the Nasdaq Capital Market (“Nasdaq”), an active market for its common stock may not be sustained, and the market price of its common stock may be volatile.

Despite WMIH’s common stock being listed on Nasdaq, we cannot assure you as to (a) whether or not WMIH’s common stock will remain in compliance with Nasdaq’s continued listing requirements or whether a public trading market for WMIH’s common stock can be sustained, (b) the liquidity of any public trading market, (c) the ability of WMIH shareholders to sell their shares of common stock, or (d) the price that WMIH shareholders may obtain for their shares of WMIH’s common stock.  The market price for shares of WMIH’s common stock may be highly volatile and could be subject to wide fluctuations. We cannot predict how the shares of WMIH’s common stock will trade in the future. Some of the factors that could affect the share price of WMIH’s common stock include: (i) our ability to consummate the Nationstar Transaction, or if the Nationstar Transaction does not close, our ability to consummate another Qualified Acquisition; (ii) the financial results of Nationstar; (iii) our financial condition; (iv) actual or anticipated variations in our operating results; (v) publication of research reports and recommendations by financial analysts; (vi) additions or departures of key management personnel; (vii) proposed or adopted regulatory or tax law changes or developments; (viii) speculations reported in the press or investment community; (ix) issuances of new equity pursuant to future offerings; (x) general market and economic conditions; and (xi) any required redemption or repurchase of our Series B Preferred Stock. In some cases, U.S. stock markets have produced downward pressure on stock prices for some issuers without regard to those issuers’ underlying financial strength. A significant decline in our stock price could result in substantial losses for individual stockholders.

WMIH’s common stock is currently listed on Nasdaq. If we do not comply with Nasdaq’s continued listing requirements, these shares may be delisted from Nasdaq, which would likely result in WMIH’s shares being traded on the OTC Markets OTCQB electronic quotation system (or the lesser tier OTC Pink), and negatively affect the liquidity and trading prices of WMIH’s common stock.

WMIH’s common stock is currently listed on Nasdaq. In order to maintain eligibility for continued listing on Nasdaq, WMIH must fulfill certain minimum listing requirements, including specified financial and corporate governance criteria.  Although currently in compliance with Nasdaq’s listing requirements, WMIH was not, until recently, in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2), which requires listed securities to maintain a minimum bid price of $1.00 per share. While WMIH regained compliance with the minimum bid price rules on February 27, 2018, there can be no assurance that WMIH can maintain such minimum listing requirements, and in the event that WMIH cannot, such failure would likely result in WMIH’s shares being traded on the OTC Markets OTCQB electronic quotation system (or the lesser tier OTC Pink).  If WMIH is not able to maintain the listing of its common stock on Nasdaq, WMIH could face material adverse consequences, including:

Anti-takeover provisions in our Certificate of Incorporation and Amended and Restated Bylaws (“Bylaws”) and under Delaware law, as well as certain existing contractual arrangements, make a third-party acquisition of WMIH difficult.

WMIH’s Certificate of Incorporation, including Article VIII thereof, and Bylaws, as well as certain contractual arrangements with KKR and Nationstar, contain provisions that make it difficult for a third party to acquire WMIH, even if doing so might be deemed beneficial by WMIH’s stockholders. These provisions could limit the price that investors might be willing to pay in the future for shares of WMIH’s common stock. WMIH is also subject to certain provisions of Delaware law that could delay, deter or prevent a change in control of WMIH. See “—Until July 5, 2019, we are required to obtain prior consent from KKR Wand Holdings Corporation (“KKR Wand”) to enter into any definiti ve agreement with respect to any Acquisition.” and “—Risk Factors Relating to the Pending Nationstar Transaction— The Merger Agreement restricts the Company’s ability to take certain action which would otherwise be permitted and which our stockholders may consider desirable .”

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We may sell additional shares of WMIH’s common stock or other securities, or amend outstanding WMIH securities, including the Series B Preferred Stock, in the future to meet WMIH’s capital requirements. In such circumstances, the owners hip interests of WMIH’s stockholders prior to such sale could be substantially diluted.

WMIH has 3,500,000,000 shares of common stock authorized for issuance and 10,000,000 shares of preferred stock authorized for issuance. As of February 28, 2018, WMIH had 206,714,132 shares of its common stock issued and outstanding. The possibility of dilution posed by shares available for future sale could reduce the market price of WMIH’s common stock and could make it more difficult for WMIH to raise funds through equity offerings in the future.  In fact, WMIH has consummated two corporate financing transactions that are, on an as-converted basis, dilutive to stockholders. Specifically, effective January 30, 2014, WMIH issued 1,000,000 shares of Series A Preferred Stock, which may be converted into 10,065,629 shares of WMIH’s common stock, and Warrants to purchase 61,400,000 shares of WMIH’s common stock. Also, on January 5, 2015, WMIH issued 600,000 shares of Series B Preferred Stock that were initially convertible, upon a Qualified Acquisition, into as much as 342,857,143 shares of WMIH’s common stock. As a result of the Series B Amendment, effective as of January 5, 2018, the terms of the Series B Preferred Stock were amended to change the conversion price to a fixed conversion price of $1.35 per share of common stock and provide for a special distribution of 19.04762 shares per Series B share upon any Acquisition as well as to change the dividend rate to a 5.00% semi-annual payment in shares of common stock. Accordingly, the number of shares of WMIH common stock issuable upon conversion of the Series B Preferred Stock increased to 444,444,444. In addition, the Series B Amendment entitles the holders of the Series B Preferred Stock to special distributions of up to 11,428,572 shares of WMIH’s common stock in connection with Acquisitions as well as up to 64,285,714 shares of WMIH’s common stock in the form of regular dividends.

The value of WMIH’s common stock, and our ability to raise capital in the financial markets at times and at prices favorable to us, may be materially and adversely affected by the future sale of additional shares of WMIH’s common stock or other securities, the future amendment of outstanding WMIH securities, including the Series B Preferred Stock, or the perception that either of the foregoing could occur or become necessary, and by the terms and conditions of the Series B Preferred Stock, which is senior in priority to WMIH’s common stock.  See “Risks Related to the Series B Preferred Stock.”

The redemption or repurchase of our Series B Preferred Stock may have a material adverse effect on holders of WMIH’s common stock.

We currently have limited business operations and assets.  If we are obligated to redeem or repurchase some or all of our Series B Preferred Stock on the Series B Redemption Date because we have not completed an Acquisition or Qualified Acquisition prior to such date, it is likely that our business and financial prospects will be adversely affected and the holders of WMIH’s common stock are likely to lose a significant part or all of their investment. While we would expect to seek alternative financing under those circumstances, any such alternative financing could cause an ownership change and there can be no assurance such financing would be available at terms we would determine to be acceptable, or at all.

Risks Related to the Series B Preferred Stock

The Series B Preferred Stock ranks junior to all of our indebtedness and other liabilities.

In the event of our bankruptcy, liquidation, reorganization or other winding-up, our assets will be available to pay obligations on the Series B Preferred Stock only after all of our indebtedness and other liabilities have been paid. The rights of holders of the Series B Preferred Stock to participate in the distribution of our assets will rank pari passu with our Series A Preferred Stock and any parity stock we issue in the future. In addition, we are a holding company and the Series B Preferred Stock effectively ranks junior to all existing and future indebtedness and other liabilities of our subsidiaries and any capital stock of our subsidiaries not held by us. The rights of holders of the Series B Preferred Stock to participate in the distribution of assets of our subsidiaries ranks junior to the prior claims of that subsidiary’s creditors and any other equity holders. Consequently, if we are forced to liquidate our assets to pay our creditors, we may not have sufficient assets remaining to pay amounts due on any or all of the Series B Preferred Stock then outstanding. We and our subsidiaries may incur substantial amounts of additional debt and other obligations that will rank senior to the Series B Preferred Stock.

We are subject to restrictions on the redemption or repurchase of the Series B Preferred Stock.

Under our Certificate of Incorporation, we will be obligated to redeem the Series B Preferred Stock (if not previously converted) on the Series B Redemption Date, and to repurchase the Series B Preferred Stock tendered for repurchase upon certain events. However, we may be unable to redeem or repurchase the Series B Preferred Stock due to restrictions under applicable law or contractual restrictions.

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Delaware law provides that a redemption or repurchase payment on capital stock may only be paid from “surplus” or, if there is no “surplus,” from the corporation’s net profits for the then-current or the preceding fiscal year. Unless we operate profitably, our ability to redeem or repurchase the Series B Preferred Stock would require the avai lability of adequate “surplus,” which is defined as the excess, if any, of our net assets (total assets less total liabilities) over our capital. Since the Effective Date, we have often not achieved profitability, and when profitable, did not achieve signi ficant profitability. We do not expect to achieve significant profits in the future unless we consummate an Acquisition.

We may also enter into debt or other agreements in the future that may restrict us from redeeming or repurchasing the Series B Preferred Stock.

Further, even if we are permitted under our contractual obligations and Delaware law, as applicable, to redeem or repurchase the shares of Series B Preferred Stock, we may not have sufficient cash to do so. See “—We may not have sufficient funds to redeem or repurchase the Series B Preferred Stock.”

We may not be able to consummate an Acquisition or a Qualified Acquisition prior to the Series B Redemption Date.

If we are unable to consummate the Nationstar Transaction, there can be no assurances that we will be able to timely identify and/or consummate an alternative Acquisition or a Qualified Acquisition due to inability to find an appropriate target company or companies, an inability to obtain appropriate financing, an inability to agree to the terms of an acquisition(s) or for any other reason prior to the Series B Redemption Date. Additionally, the Letter Agreement, subject to certain conditions and until July 5, 2019, requires WMIH to obtain prior written consent from KKR Wand before entering into a definitive agreement with respect to any Acquisition. In the event that the Nationstar Transaction is not consummated, we anticipate that the assessment of each specific target business, and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments relevant to the acquisition of any such target business, will require substantial time and attention on the part of our management and substantial costs for advisors including accountants, attorneys and others. If we do not consummate the Nationstar Transaction and we decide not to complete an alternative Acquisition or Qualified Acquisition that is being pursued, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Also, if we reach an agreement relating to a specific target business, we may fail to complete our initial business combination for any number of reasons, including those beyond our control. Any such event will result in a loss to us of the related costs incurred which could materially and adversely affect subsequent attempts to locate and acquire or merge with another business.

Furthermore, under those circumstances, we expect to encounter intense competition from other entities, some having a business objective similar to ours, including private investors (which may be investment partnerships or individuals) and other entities, domestic and international, competing for the types of businesses we may consider for acquisition. Many of these potential competitors are well-established, have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries and possess greater financial, technical, human and other resources or more local industry knowledge than we do. Our ability to compete with respect to the acquisition of certain target businesses may be limited by our available resources compared to those of competing bidders and may give others an advantage in pursuing the acquisition of such target businesses. Furthermore, because we are required to redeem the Series B Preferred Stock (if not previously converted) on the Series B Redemption Date if we have not consummated the Nationstar Transaction or an alternative Qualified Acquisition (as the case may be), we may be at a competitive disadvantage in successfully negotiating a business combination.

The Series B Preferred Stock is not convertible at the option of holders.

All or a portion of the Series B Preferred Stock automatically converts into WMIH’s common stock upon a Qualified Acquisition or an Acquisition, as the case may be at a fixed $1.35 conversion price even if such conversion is unfavorable because WMIH’s common stock is trading below the conversion price. The closing of the Nationstar Transaction will constitute a Qualified Acquisition and result in the mandatory conversion of all of the Series B Preferred Stock.  

The price of WMIH’s common stock, and the Series B Preferred Stock, may fluctuate significantly, which may make it difficult for a holder to resell the Series B Preferred Stock or WMIH’s common stock issuable upon mandatory conversion thereof at such times as or at prices a holder may find attractive.

The market price of WMIH’s common stock may continue to fluctuate due to a variety of factors, many of which are beyond our control. In addition, financial markets in general (including the stock market) have, of late, experienced extreme volatility that has often been unrelated to the operating performance of a particular company.  These broad market fluctuations may adversely affect the market price of WMIH’s common stock. Because the Series B Preferred Stock is mandatorily convertible into shares of WMIH’s common stock upon the consummation of an Acquisition or a Qualified Acquisition, volatility or depressed prices for WMIH’s common stock could have a similar effect on the trading price of the Series B Preferred Stock. Holders who have received shares of WMIH’s common stock upon mandatory conversion of their shares of Series B Preferred Stock could also be subject to the risk of volatility and depressed prices.  

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In addition, the market price of WMIH’s common stock could also be affected by possible sales of WMIH’s common stock by investors who view the Series B Preferred Stock as a more attractive means of equity participation in us and by hedging or arbitrage trading activity that may develop involving WMIH’s common stock. The hedging or arbitrage could, in turn, affect the trading price of the Series B Preferred Stock or any WMIH common stock that holders receive upon conversion of the Series B Preferred Stock.

The conversion price of the Series B Preferred Stock may not be adjusted for all dilutive events that may adversely affect the market price of the Series B Preferred Stock or WMIH’s common stock issuable upon mandatory conversion of the Series B Preferred Stock.

The number of shares of WMIH’s common stock that holders of Series B Preferred Stock are entitled to receive upon mandatory conversion of the Series B Preferred Stock is subject to adjustment for certain specified events, including, but not limited to, stock splits, stock recombinations, or tender or exchange offers for common stock of WMIH (which events are more limited than customary for convertible securities because the holders of Series B Preferred Stock participate in dividends on WMIH’s common stock on an as converted basis). However, other events, which may adversely affect the market price of WMIH’s common stock, may not result in any adjustment, such as the issuance of WMIH’s common stock in an acquisition or for cash. Further, if any of these other events adversely affects the market price of WMIH’s common stock, we expect it to also adversely affect the market price of our Series B Preferred Stock. In addition, the terms of our Series B Preferred Stock do not restrict our ability to offer WMIH’s common stock or securities convertible into WMIH’s common stock in the future or to engage in other transactions that could dilute WMIH’s common stock. We have no obligation to consider the interests of the holders of our Series B Preferred Stock in engaging in any such offering or transaction. See “—Risk Factors Relating to the Pending Nationstar Transaction— The Merger Agreement restricts the Company’s ability to take certain action which would otherwise be permitted and which our stockholders may consider desirable ” for information on restrictions on certain actions by WMIH under the Merger Agreement.

We may issue additional series of preferred stock that rank equally to the Series B Preferred Stock as to dividend payments and liquidation preference.

Neither our Certificate of Incorporation nor the terms governing the Series B Preferred Stock prohibits us from issuing additional series of preferred stock that would rank equally to the Series B Preferred Stock as to dividend payments and liquidation preference. Our Certificate of Incorporation provides that we have the authority to issue 10,000,000 shares of preferred stock, including the 600,000 shares of Series B Preferred Stock and the 1,000,000 shares of Series A Preferred Stock currently issued. The issuances of other series of preferred stock could have the effect of reducing the amounts available to the Series B Preferred Stock in the event of our liquidation, winding-up or dissolution. See “—Risk Factors Relating to the Pending Nationstar Transaction— The Merger Agreement restricts the Company’s ability to take certain action which would otherwise be permitted and which our stockholders may consider desirable ” for information on restrictions on certain actions by WMIH under the Merger Agreement.

Holders of Series B Preferred Stock will have limited rights with respect to the shares of WMIH’s common stock they are entitled to receive in connection with a mandatory conversion, a special distribution or a regular dividend until the Series B Preferred Stock is converted, a special distribution is made, or regular dividends are declared, but may be adversely affected by certain changes made with respect to WMIH’s common stock.

Holders of Series B Preferred Stock will have limited rights with respect to the shares of WMIH’s common stock they are entitled to receive in connection with a mandatory conversion, a special distribution or a regular dividend, including limited voting rights, and no rights to respond to tender offers for the common stock by virtue of holding shares of Series B Preferred Stock, prior to the issuance of shares of WMIH’s common stock upon such mandatory conversion, a special distribution or a regular dividend, if any, but an investment in our Series B Preferred Stock may be negatively affected by these events. Upon a mandatory conversion, special distribution or regular dividend, a holder of Series B Preferred Stock will be entitled to exercise the rights of a holder of WMIH’s common stock only as to matters for which the relevant record date occurs on or after the applicable mandatory conversion date.

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We may not have sufficient funds to redeem or repurchase the Series B Preferred Stock.

We are required to redeem the Series B Preferred Stock (if not previously converted) on the Series B Redemption Date (i.e. October 5, 2019) in the event we have not consummated a Qualified Acquisition; provided, if prior to the Series B Redemption Date we have publicly announced that WMIH has entered into a definitive agreement for an Acquisition, the Series B Redemption Date will be extended to the earlier of April 5, 2020 and the day immediately following the date such definitive agreement is terminated or the date such Acquisition is closed. The aggregate redemption cost, assuming all 600,000 shares remain outstanding, of all of the Series B Preferred Stock is $600.0 million, plus shares of WMIH’s common stock in respect of any accrued and unpaid dividends, if any, whether or not declared. In addition, we are required to offer to repurchase (if not previously converted) the Series B Preferred Stock upon a Change of Control (as such term is defined in Article VI of the Certificate of Incorporation). However, we may not have sufficient funds, and we may be unable to obtain additional financing, to make such a redemption or repurchase as required, each of which could have a material adverse effect on the Company and the value of our capital stock.  This risk is increased by the fact that we (i) have very limited operations, (ii) in the past have not generated significant cash flows, (iii) may use net proceeds that have been deposited into the escrow account in connection with the Series B Preferred Stock Financing to explore and fund, in whole or in part, Acquisitions whether completed or not, including reasonable attorney fees and expenses, accounting expenses, due diligence, termination fees and other contractual obligations related to the transaction, and financial advisor fees and expenses, and (iv) may consummate one or more Acquisitions that do not constitute a Qualified Acquisition (and accordingly may use net proceeds that have been deposited into the escrow account), which may cause us to have insufficient funds to redeem or repurchase the remaining outstanding Series B Preferred Stock as required. The Company will periodically assess our ability to redeem or repurchase the Series B Preferred Stock. If the Company determines that conditions exist that raise substantial doubt about our ability to continue as a going concern within one year after the financial statements are issued or available to be issued, due to our inability to redeem or repurchase the Series B Preferred Stock, and we are unable to demonstrate our ability to refinance or obtain access to additional funding, our auditors could issue a going concern qualification to our financial statements.  A “going concern” opinion could impair our ability to finance our operations through the sale of equity, incurrence of debt or other financing alternatives and could have a material adverse effect on the Company and the value of our capital stock.

We may not have sufficient earnings and profits in order for dividends on the Series B Preferred Stock to be treated as dividends for U.S. federal income tax purposes.

Cash dividends and other non-cash distributions treated as distributions under Sections 305(b) or 305(c) of the Code payable by us on the Series B Preferred Stock may exceed our current and accumulated earnings and profits, as calculated for U.S. federal income tax purposes. If that occurs, it will result in the amount of the dividends that exceed such earnings and profits being treated for U.S. federal income tax purposes first as a return of capital to the extent of the holder’s adjusted tax basis in the Series B Preferred Stock, and the excess, if any, over such adjusted tax basis as capital gain. Such treatment will generally be unfavorable for corporate holders and may also be unfavorable to certain other holders.

Stock dividends with respect to the Series B Preferred Stock may be treated as taxable dividends under Sections 305(b) or 305(c) of the Code.

A stock distribution made by a corporation to its shareholders is generally a tax-free transaction for U.S. federal income tax purposes under Section 305(a) of the Code, except as provided in Sections 305(b) and 305(c) of the Code. WMIH believes that distributions of stock with respect to the Series B Preferred Stock should be treated, under Section 305(a) of the Code, as a nontaxable distribution for U.S. federal income tax purposes. There can be no assurance that this position will not be challenged successfully by an applicable taxing authority, or significantly modified by new legislation, changes in an applicable taxing authority’s positions or court decisions.

If such a stock dividend is treated as a distribution described in either Section 305(b) or 305(c) of the Code, then the receipt of such stock dividend would be treated as a taxable dividend in an amount equal to the lesser of the fair market value of such stock dividend and the holder’s allocable share of the Company’s current and accumulated earnings and profits. Any excess would be treated first as a tax-free return of capital to the extent of such holder’s adjusted basis in its Series B Preferred Stock and then as capital gain.

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Holders of Series B Preferred Stock may be subject to tax if we make or fail to make certain adjustments to the conversion price of the Series B Preferred Stock even though a holder of Series B Preferred Stock does not receive a corresponding cash distribution.

The conversion price of the Series B Preferred Stock is subject to adjustment in certain circumstances. If the conversion price is adjusted as a result of a distribution that is taxable to WMIH’s common stockholders, a holder of Series B Preferred Stock may be deemed to have received a dividend subject to U.S. federal income tax to the extent of our current and accumulated earnings and profits without the receipt of any cash. In addition, a failure to adjust (or to adjust adequately) the conversion price after an event that increases a Series B Preferred Stockholder’s proportionate interest in us could be treated as a deemed taxable dividend to such holder. If a holder of Series B Preferred Stock is a non-U.S. holder, any deemed dividend may be subject to U.S. federal withholding tax at a 30% rate, or such lower rate as may be specified by an applicable treaty, which may be set off against subsequent payments on the Series B Preferred Stock. A non-U.S. holder is a beneficial owner of Series B Preferred Stock or WMIH’s common stock received in respect thereof (other than a partnership or entity treated as a partnership for U.S. federal income tax purposes) and that is not a U.S. holder.

Affiliates of KKR own a substantial amount of equity interests in us, and have other substantial interests in us and agreements with us, including an approval right with respect to Acquisitions, and may have conflicts of interest with us or the other holders of our capital stock.

As of February 28, 2018, affiliates of KKR held shares of WMIH stock representing approximately 24% of WMIH’s voting power on an as-converted basis. Affiliates of KKR are parties to the Investment Agreement and the Investor Rights Agreement (as such terms are defined in Note 8: Financing Arrangements to the consolidated financial information in Part II, Item 8 of this Annual Report on Form 10-K). Furthermore, the Letter Agreement, subject to certain conditions and until July 5, 2019, requires WMIH to obtain prior written consent from KKR Wand, an affiliate of KKR, before entering into a definitive agreement with respect to any Acquisition.

As a result, affiliates of KKR may have substantial influence over our decisions to enter into any corporate transaction, including with respect to any Acquisition, and may have the ability to prevent any transaction that requires the approval of stockholders regardless of whether other holders of our capital stock believe that any such transactions are in their own best interests. For example, affiliates of KKR could potentially cause us to refrain from making acquisitions in a manner that is not in the best interests of other holders of the Series B Preferred Stock, whether or not such acquisitions are in the best interests of holders of WMIH’s common stock. KKR will not provide oversight of or have control over or be involved with the investment activities or other operations of the Company.

Neither KKR nor its director appointees are required to present us with investment opportunities and may pursue them separately or otherwise compete with us.

Our management team, with support from KKR personnel, are focused on closing the Nationstar Transaction. Nevertheless, if we are unable to consummate the Nationstar Transaction, neither KKR nor its director appointees are obligated to present us with alternative investment opportunities.  Moreover, each of KKR, its officers and its directors presently has, and any of them in the future may have, additional fiduciary or contractual obligations to another entity pursuant to which KKR, such officer or such director is required to present an acquisition opportunity to such entity. Accordingly, if any of KKR, its officers or its directors becomes aware of an acquisition opportunity which is suitable for an entity to which he or she has then current fiduciary or contractual obligations, it, he or she will honor its, his or her fiduciary or contractual obligations to present such acquisition opportunity to such other entity, and only present it to us if such entity rejects the opportunity. Our Certificate of Incorporation provides that we renounce our interest or expectancy in any corporate opportunity in which KKR or its director appointees seek to participate unless such opportunity (i) was first presented to KKR’s director appointees solely in their capacity as directors of WMIH or (ii) is identified by KKR or its director appointees solely through the disclosure of information by or on behalf of us.  We will not be prohibited from pursuing an investment opportunity with respect to which we have renounced our interest or expectancy.

Additionally, KKR is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us or that compete with us for acquisitions. KKR may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. In addition, KKR’s interest in its portfolio companies could impact our ability to pursue acquisition opportunities.

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Other than under specific circumstances, KKR is not our investment advisor and owes no fiduciary duty to us or to holders of WMIH’s common stock, Series A Preferred Stock or Serie s B Preferred Stock.

WMIH engaged KKR Capital Markets as a financial advisor in connection with the Nationstar Transaction, including the placement of certain debt securities to be issued in connection with closing that transaction. Apart from providing WMIH with specific financial advisory services in connection with the Nationstar Transaction, KKR is not our investment adviser and otherwise has no advisory, fiduciary or similar relationship with us or with holders of WMIH’s common stock or Series B Preferred Stock.  KKR is not our sponsor, and the Company is not an investment product offered by KKR.  KKR has no obligations (contractual, fiduciary or otherwise) to us, disclaims having any liability for our performance, investments or activities, and will not be responsible for any action or inaction of our management.

Under Delaware law, we can amend Article VI of the Certificate of Incorporation, which governs the terms of the Series B Preferred Stock, without the consent of the common stockholders as long as we obtain the consent of holders of at least a majority of the shares of Series B Preferred Stock.

Under Delaware law, Article VI of the Certificate of Incorporation, which governs the terms of the Series B Preferred Stock, can be amended without the consent of the common stockholders if WMIH receives the consent of holders of at least a majority of the shares of Series B Preferred Stock. Therefore, a holder of Series B Preferred Stock will be governed by the terms as they may be amended from time to time even if such holder does not approve such amendment to the terms of the Series B Preferred Stock. See “—Risk Factors Relating to the Pending Nationstar Transaction— The Merger Agreement restricts the Company’s ability to take certain action which would otherwise be permitted and which our stockholders may consider desirable ” for information on restrictions on certain actions by WMIH under the Merger Agreement.

Risks Related to WMMRC’s Business

General economic conditions that negatively affect housing prices may negatively affect the credit performance of WMMRC’s underlying portfolio of mortgage loans and could continue to have an adverse effect on our future performance.

There can be no assurances that recent improvement in the housing and credit markets will continue or improve. Prolonged high unemployment or deterioration in the housing markets could negatively impact the performance of WMMRC’s underlying mortgage assets leading to a potential increase in defaults and losses.

The negative financial performance of the primary mortgage insurers with whom WMMRC does business may negatively affect our financial performance and results.

One or more of the primary mortgage insurers with whom we do business may be vulnerable to adverse market conditions and because of that uncertainty there can be no assurances that such insurers can withstand the market and financial pressures they may face from time to time. In fact, at least one counterparty is currently operating subject to state supervision. These factors could have negative consequences for WMMRC’s cash flows and WMMRC’s ability to pay dividends to WMIH in the future.

WMMRC is dependent on primary mortgage insurers to provide it with services. A disruption in the provision of such services could negatively affect WMMRC’s operations and financial performance.

WMMRC depends upon our primary mortgage insurers to provide us with several services, including providing us with the monthly cession statements that provides the basis for our accounting and financial records, information regarding applicable minimum capital thresholds, the establishment of ceded loss reserves, the payment of ceded premium (i.e., revenue) and the withdrawal of funds for paid losses. If our counterparties are unable to provide such services or if such services are otherwise interrupted or modified as a result of actions beyond our control (e.g., the placement of a counterparty into receivership or conservatorship), then such actions may be detrimental to our future financial performance.

Because loss reserve estimates are subject to uncertainties and are based on assumptions that are volatile, ceded paid losses may be substantially different from our ceded loss reserves.

The establishment of loss reserves is complex and requires judgment by management about the effect of matters that is inherently uncertain. In addition, establishing such loss reserves requires management to make various assumptions and judgments based on a variety of factors, including frequency of losses, severity of losses and timing of losses. As a result, WMMRC periodically monitors and adjusts its assumptions based on actual loan performance information, market indicators and other factors. Nevertheless, factors outside of WMMRC’s control, such as the overall performance of the economy, volatile housing prices, public policy considerations and borrower behavior all influence its assumptions and are subject to considerable change over time.

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Loan loss mitigation efforts (including efforts to modify loans, effect s hort sales, loan rescissions and claim denials) by the firms servicing our underlying reinsured mortgage loans may not be effective.

WMMRC relies on the servicers of the mortgage loans to provide surveillance, loss mitigation and salvage efforts to ensure that the mortgage loans it reinsures are serviced according to the appropriate guidelines and significant efforts are made to ensure a beneficial outcome. Nevertheless, there can be no assurances that such efforts will be successful or have any effect on the ultimate ability of a borrower to satisfy such borrower’s obligations under a mortgage WMMRC has reinsured.

Low interest rates can negatively affect WMMRC’s financial performance.

A low interest rate environment can negatively affect WMMRC’s financial performance. Low interest rates provide an opportunity for generally well-qualified borrowers to refinance their mortgage loans. This typically results in a cancelation of the mortgage insurance policy applicable to such loans and terminates any ceded future premiums we would expect from those loans. As a result, the portfolio of mortgage loans WMMRC reinsures could experience a larger percentage in the number of borrowers who are less creditworthy. Additionally, a low-interest rate environment generally results in lower yields on WMMRC’s investment portfolio, as maturing investments are generally reinvested at lower yields thereby reducing investment income.

WMMRC is subject to comprehensive regulations, including minimum capital standards, which are subject to change and may harm our business.

WMMRC is domiciled in the State of Hawaii and is subject to the rules and regulations as promulgated by the State of Hawaii and its Insurance Division, its primary state regulator. Foremost among those rules and regulations are minimum capital standards. Management believes that as of December 31, 2017, WMMRC satisfied such minimum capital standards and other applicable rules and regulations. Nevertheless, there can be no assurances of WMMRC’s future ability to meet those standards, or as they may be revised.

In addition, WMMRC’s business may be affected by legislative or regulatory reforms of the U.S. housing finance system, as well as the application of certain public or private sector programs designed to assist homeowners avoid foreclosure. In each case, these reforms and programs could change the economic behavior of either the mortgage insurance policyholders or the mortgage insurance companies to the detriment of WMMRC. Following the severe financial dislocations of 2008, new, sweeping rules and regulations were promulgated by federal, state and local regulatory authorities, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Because WMMRC is currently operating its business in runoff mode, it has not, to date, needed to materially change any of its business practices in response to various regulatory initiatives, including the Dodd-Frank Act. Nevertheless, there can be no assurances that WMMRC will not be required to undertake changes to its business practices in the future in response to one or more regulatory initiatives.

In addition, WMMRC’s reinsurance counterparties with active underwriting and other businesses have disclosed heightened regulatory oversight of their operations, including by the Consumer Financial Protection Bureau (“CFPB”) and we cannot predict the extent to which such heightened scrutiny may affect how those counterparties do business with WMMRC. Likewise, neither WMMRC nor its counterparties can predict the full impact various regulatory initiatives currently pending or being considered may have on their respective businesses or operations.

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Risk Factors Relating to the Pending Nationstar Transaction

Completion of the Nationstar Transaction is subject to a number of conditions and if these conditions are not satisfied or waived, the Merger will not be completed as contemplated.

The obligations of WMIH and Nationstar to complete the Nationstar Transaction are subject to satisfaction or waiver of a number of conditions, including, among others (i) the adoption of the Merger Agreement by the holders of a majority of Nationstar’s outstanding common stock; (ii) the approval of the issuance of shares of WMIH Common Stock by a majority of all votes cast by holders of outstanding shares of WMIH Common Stock and preferred stock (voting on an as-converted basis in accordance with WMIH’s Certificate of Incorporation); (iii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (iv) obtaining required regulatory approvals as specified in the schedules to the Merger Agreement without the imposition of a condition that would have a material adverse effect on the combined surviving company and its subsidiaries, taken as a whole, following the Merger (“Burdensome Condition”); (v) the effectiveness of a registration statement on Form S-4 relating to the Merger; (vi) the approval for listing the WMIH Common Stock issuable in the Merger on the Nasdaq Stock Market LLC, subject to official notice of issuance; (vii) there being no law or injunction prohibiting consummation of the transactions contemplated under the Merger Agreement; (viii) subject to specified materiality standards, the continuing accuracy of certain representations and warranties of each party; and (ix) performance by each party in all material respects with its covenants. The receipt of a tax opinion from WMIH’s tax advisor that there should not have been an “ownership change” (within the meaning of Section 382(g) of the Internal Revenue Code) since March 19, 2012, and the Merger, taken together with the other transactions contemplated by the Merger Agreement and occurring on the closing date, should not result in such an ownership change, is a condition to the obligations of Nationstar to consummate the Merger. The closing of the Merger is not subject to a financing condition.  There can be no assurance that the conditions to closing of the Nationstar Transaction will be satisfied or waived, or that the Merger will be completed.

In particular, completion of the Nationstar Transaction is conditioned upon the expiration or early termination of the waiting periods relating to the Merger under the HSR Act and obtaining the required governmental authorizations, including the requisite approval from the various federal and state agencies regulating the mortgage industry, having been obtained and being in full force and effect. Although WMIH and Nationstar have agreed in the Merger Agreement to use their reasonable best efforts, subject to certain limitations, to make certain governmental filings or obtain the required governmental authorizations, as the case may be, there can be no assurance that the relevant waiting periods will expire or that the relevant authorizations will be obtained. In addition, the governmental authorities with or from which these authorizations are required have broad discretion in administering the governing regulations. As a condition to authorization of the Merger or related transactions, these governmental authorities may impose requirements, limitations or costs or require divestitures or place restrictions on the conduct of the combined surviving company’s business after completion of the Merger. There can be no assurance that regulators will not impose conditions, terms, obligations or restrictions and that such conditions, terms, obligations or restrictions will not have the effect of delaying completion of the Merger or imposing additional material costs on or materially limiting the revenues of the combined company following the Merger, or will not otherwise be considered a Burdensome Condition.  There can be no assurance that the conditions to closing of the Nationstar Transaction will be satisfied, and we can provide no assurance that these conditions will not result in the delay or abandonment of the Merger.

The Merger Agreement restricts the Company’s ability to take certain action which would otherwise be permitted and which our stockholders may consider desirable.  

Until the earlier of the consummation of the Merger or termination of the Merger Agreement, we and our subsidiaries are required to conduct our business in the ordinary course of business consistent with past practices since December 31, 2015.  We have agreed not to, subject to limited exceptions, among other things: (i) pay dividends, split or issue securities, purchase or redeem our securities, other than payment of the semi-annual 5.00% dividend to the holders of the Series B Preferred Stock; (ii) amend our Certificate of Incorporation or bylaws; (iii) issue, pledge, sell or otherwise encumber to any lien of any shares of our securities or amend the terms or rights of any of our securities; (iv) make any acquisitions which would reasonably be expected to prevent, delay or impair the consummation of the Merger; (v) enter any new businesses; (vi) make any loans or advances; (vii) amend any of our material agreements; (viii) incur any indebtedness; (ix) modify any severance or termination pay benefits or increase any compensation arrangements; and  (x) permit any Transfers under Section 2(a) of Article VIII of our Certificate of Incorporation.

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Failure to complete the Nationstar Transaction as contemplated could negatively impact the Company’s ability to consummate a Qualified Transaction, WMIH’s common stock price and the future business and financial results of WMIH.   

If for any reason the Merger is not completed as contemplated or the closing of the Merger is significantly delayed, the business and results of operations of WMIH and/or the combined company would likely be adversely affected.

If the Merger Agreement is terminated, we may be obligated to pay Nationstar a cash termination fee, which could range from approximately $29.4 million to $125.0 million, depending on the circumstances surrounding termination.  In the event that the Merger Agreement is terminated because the WMIH stockholders do not approve the share issuance in connection with the Merger, WMIH will have to pay Nationstar’s expenses of approximately $29.4 million, and if WMIH enters into an agreement for or completes an acquisition in the subsequent 12 months, we will owe Nationstar additional amounts up to a total of $65.0 million.  Payment of such large amounts of cash would deplete a significant portion of WMIH’s escrowed proceeds from the offering of Series B Preferred Stock, which would adversely affect our ability to consummate a Qualified Acquisition.  WMIH could also be subject to litigation related to any failure to complete the Merger or related to any enforcement proceeding commenced against WMIH to perform its obligations under the Merger Agreement.

Further, failure to consummate the Nationstar Transaction could cause negative reactions from the financial markets, including negative impacts on WMIH’s Common Stock price.  Upon the announcement of the Merger, WMIH’s closing stock price increased above the $1.00 trading price for the requisite period and WMIH regained compliance with Nasdaq continued listing requirements.  In the event the Merger is not completed, WMIH’s Common Stock price could be adversely impacted and WMIH may fail to continue to satisfy continued listing requirements.

WMIH has incurred and will continue to incur substantial costs in connection with the proposed Merger. These costs are primarily associated with the fees of attorneys, accountants and financial advisors. In addition, WMIH has diverted significant management resources in an effort to complete the Merger, which would otherwise have been devoted to the pursuit of other transaction opportunities, day-to-day operations and other opportunities that may have been beneficial to WMIH.  WMIH is also subject to restrictions contained in the Merger Agreement on the conduct of the Company’s business during the pendency of the Merger. Such restrictions, the waiver of which is subject to the consent of Nationstar (in certain cases, not to be unreasonably withheld, conditioned or delayed), prevent WMIH from making Acquisitions, taking certain other specified actions or otherwise pursuing business opportunities during the pendency of the Merger. If the Merger is not completed, the Company will have received little or no benefit in respect of such costs incurred or opportunities forgone.

If the Merger is not completed as contemplated, these risks may materialize and may adversely affect WMIH’s prospects, businesses, financial condition, financial results and stock prices.  

The Merger Agreement limits our ability to pursue alternatives to the Nationstar Transaction and in certain circumstances could require us to pay substantial termination or other fees which would reduce our cash position and have a material adverse effect on our financial condition and could impair our ability to consummate an alternative Qualified Acquisition.

While the Merger Agreement contains provisions that prohibit both WMIH and Nationstar from soliciting proposals relating to alternative business combination transactions while the Merger is pending, we are further prohibited from responding to unsolicited proposals while Nationstar is permitted to entertain unsolicited offers, in certain circumstances. In the event that prior to the adoption of the Merger Agreement by the Nationstar stockholders, Nationstar receives an unsolicited superior proposal, the Nationstar board of directors may in certain circumstances exercise their fiduciary out and withhold, withdraw, qualify or modify its recommendation that Nationstar’s stockholders adopt the Merger Agreement, subject to complying with notice and other specified conditions, including giving WMIH the opportunity to propose revisions to the Merger Agreement for a four-day period following notice.  If the Nationstar board of directors withdraws or changes their recommendation in favor of the adoption of the Merger Agreement in favor of a superior proposal and either party terminates the Merger Agreement in connection therewith, Nationstar must promptly pay WMIH a $65 million termination fee.  Even though in this instance we would receive a $65.0 million termination fee, such fee would be used to offset the substantial expenses that WMIH has already incurred in connection with the Nationstar Transaction, and the passage of time could impair our ability to consummate an alternative Qualified Acquisition prior to the Series B Redemption Date.  

Our Board may only change its recommendation that its stockholders approve the Merger in the limited case of an unforeseeable event (not related to an acquisition proposal) that was not known or reasonably foreseeable to the Board.  Should the WMIH Board make the determination that such an intervening event has occurred, WMIH shall notify Nationstar and the parties shall have four business days to negotiate in good faith (should Nationstar desire to negotiate) regarding any revisions to the terms of the Merger based on such intervening event.  If our Board chooses to change its recommendation to the stockholders at such time, Nationstar has the right to terminate the Merger Agreement and we would be required to pay a $65.0 million termination fee to Nationstar.  

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Further, if we are unable to obtain the requisite approval of our stockholders, either party may terminate the Merger Agreement.  In such case, we would be obligated to pay Nationstar $29.4 million for their expenses.  If we enter into an agreement for or consummate a business combination within the twelve months after such termination, we would be obligated to pay Nationstar (a) in the event that such transaction relates to a proposition that was made to us or by us after th e date of the Merger Agreement and before the termination of the Merger Agreement (whether or not such proposal was withdrawn), a fee of $65.0 million less any portion of the Nationstar expenses that may have previously been paid by us or (b) in the event that such transaction does not relate to such a prior proposal, an additional fee of approximately $18.6 million, in each case within two business days.  

The payment of any termination fees by us would reduce the escrowed proceeds from the Series B Preferred Stock Financing and could impair our ability to consummate an Acquisition or a Qualified Acquisition.

Certain of our executive officers and directors have interests in the Merger that may be different from your interests as a stockholder.

The interests of some of our directors and executive officers may be different from those of our common stockholders and directors and officers may be participants in agreements or arrangements that provide them with interests in the Merger, including financial interests, that may be different from, or are in addition to, those of our other common stockholders.  These interests include but not are not limited to:

The issuance of WMIH’s common stock to Nationstar shareholders under the Merger Agreement will be dilutive to WMIH shareholders

Under the terms of the Merger Agreement, it is expected that WMIH will issue approximately 400.7 million shares of WMIH common stock to Nationstar shareholders at the closing of the Merger, which will reduce the ownership by WMIH shareholders in the combined company to approximately 64%.

WMIH may not be able to obtain its preferred form of financing to consummate the Merger, and the terms of the financing may be less favorable to WMIH than expected, depending on market conditions (although subject to committed terms).

There is no financing condition under the Merger Agreement, which means that if the conditions to closing are otherwise satisfied or waived, WMIH is obligated to consummate the Merger whether or not it has sufficient funds to pay the consideration under the Merger Agreement. WMIH currently intends to use escrowed funds and also finance a portion of the cash portion of the Merger consideration, repay and redeem certain outstanding indebtedness of Nationstar and its subsidiaries and pay related fees and expenses in connection with the Merger using a combination of proceeds from the issuance of debt securities (or, to extent such debt securities are not issued, borrowings under a high-yield bridge credit facility), borrowings under a 364-day credit facility, and cash on hand. Although WMIH has obtained $2.75 billion in debt commitments from certain lenders in connection with its financing plan, such commitment is subject to a number of conditions and WMIH cannot provide any assurances that it will be able to close the financing as anticipated. In addition, although the debt commitment letter for the financing specifies a number of terms for the different facilities, WMIH retains some exposure to changes in pricing and other terms based on market conditions at the time the financing is consummated, which could result in less favorable terms for the financing than expected (although subject to committed terms). If terms for the debt financing are less favorable than expected, financing costs could increase, potentially significantly, and WMIH’s financing or operating flexibility may be constrained. If WMIH cannot close on any element of its financing plan, it will need to pursue other financing options, which may result in less favorable financing terms that could increase costs and/or materially adversely affect the credit rating or financing and operating flexibility of the combined company.

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Any legal proceedings or governmental inquiries in connection with the Nationstar Transaction, the outcomes of which are uncertain, could delay or prevent the completion of the Nationstar Transaction.

In connection with the Nationstar Transaction, plaintiffs may file lawsuits against WMIH or Nationstar and/or the directors and officers of either company. In addition, either company may face inquiries from governmental entities in connection with the Nationstar Transaction. The outcome of such litigation or governmental inquiry is uncertain. Such legal proceedings or governmental inquiries could also prevent or delay the completion of the Nationstar Transaction and result in additional costs to us.  One of the conditions to completion of the Merger is the absence of any injunctions or laws that prevents, makes illegal or prohibits the consummating the transactions contemplated under the Merger Agreement. Accordingly, if a plaintiff is successful in obtaining a judgment prohibiting completion of the Nationstar Transaction, then such judgment may prevent the Nationstar Transaction from being completed, or from being completed within the expected time frame.