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Two Harbors Investment Corp. offers answers to frequently asked questions. Click on a specific category below. If you have additional questions, please contact Investor Relations.

Granite Point Distribution and Reverse Stock Split

On September 14, 2017, the Board of Directors of Two Harbors Investment Corp. (“Two Harbors”, the “company”, “we” or “us”) declared a special dividend (the “Stock Dividend”) to distribute the shares of common stock of Granite Point Mortgage Trust Inc. (NYSE: GPMT) (“Granite Point”) acquired by the company in connection with the contribution of its commercial real estate portfolio to Granite Point. Two Harbors also announced that its Board of Directors had approved a one-for-two reverse stock split of Two Harbors common stock (“Reverse Stock Split”). On November 1, 2017 (the “Dividend Date”), the Stock Dividend occured first, followed by the Reverse Stock Split.

Below is a summary of frequently asked questions relating to both the Stock Dividend and the Reverse Stock Split.

Granite Point Distribution

What is Granite Point Mortgage Trust Inc.?

Granite Point was formed by Two Harbors to continue and expand the commercial real estate lending business established by Two Harbors in 2015. Granite Point focuses primarily on directly originating, investing in and managing senior floating-rate commercial mortgage loans and other debt and debt-like commercial real estate investments. More information about Granite Point can be found on its website at www.gpmortgagetrust.com.

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What is Granite Point's ticker symbol?

Granite Point is traded on the New York Stock Exchange under the ticker symbol “GPMT.”

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Does Granite Point pay a dividend?

Please visit Granite Point’s website for more information on their company, including their dividend history: www.gpmortgagetrust.com.

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What was the record date for the Stock Dividend, and when did the Stock Dividend occur?

The “Record Date” for the Stock Dividend was October 20, 2017. The outstanding shares of Two Harbors common stock entitled to receive the Stock Dividend was determined on the Record Date as of 5:00 p.m. Eastern Time. The Granite Point common stock was distributed on November 1, 2017 (the “Dividend Date”).

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I owned shares of Two Harbors common stock. What did I receive as a result of the Stock Dividend?

On November 1, 2017, the company distributed the 33,071,000 shares of Granite Point common stock it had acquired in connection with the contribution of its commercial real estate portfolio to Granite Point. Two Harbors common stockholders who were entitled to take part in the Stock Dividend received 0.094765 shares of Granite Point common stock for each share of Two Harbors common stock outstanding on October 20, 2017, subject to the liquidation of fractional shares for which stockholders would have received a payment of cash in lieu of such fractional shares.

If, however, you sold your shares of Two Harbors common stock prior to the Dividend Date, you may have forfeited the right to receive shares of Granite Point common stock in the Stock Dividend. Please see the question titled “What happens if I sold my Two Harbors common stock on or prior to the Dividend Date?” for more information.

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What happens if I sold my Two Harbors common stock prior to or on the Dividend Date?

Beginning October 19, 2017 and continuing up to and including the Dividend Date, there were two markets for trading in Two Harbors common stock: (1) a “regular way” trading market (NYSE: TWO); and (2) an “ex-distribution” market (NYSE: TWO WI) that will represent the value of Two Harbors common stock following the Stock Dividend and Reverse Stock Split. Shares of Two Harbors common stock that trade on the regular way market will trade with an entitlement to receive shares of Granite Point common stock in the Stock Dividend. Shares that trade on the ex-distribution market traded without an entitlement to receive shares of Granite Point common stock in the Stock Dividend. As a result, if you are a stockholder of record on the Record Date and sold your shares of Two Harbors common stock in the regular way market prior to or on the Dividend Date, you also sold your entitlement to receive shares of Granite Point common stock in the Stock Dividend; if you sold those shares in the ex-distribution market prior to or on the Dividend Date, you would have still received the shares of Granite Point common stock that you would have otherwise been entitled to receive in the Stock Dividend. Beginning on November 2, 2017 (the business day following the Dividend Date), the regular way market for Two Harbors will begin trading “ex” or without the entitlement to receive Granite Point common stock.

HOLDERS OF TWO HARBORS COMMON STOCK ARE ENCOURAGED TO CONSULT THEIR BROKER OR FINANCIAL ADVISOR REGARDING THE SPECIFIC IMPLICATIONS OF TRADING IN THE COMMON STOCK OF EITHER TWO HARBORS OR GRANITE POINT PRIOR TO OR ON THE DIVIDEND DATE.

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When will I be able to trade the shares of Granite Point common stock to which I am entitled in the Stock Dividend?

Granite Point common stock currently trades on the NYSE under the symbol “GPMT.” In addition to the “regular way” trading of Granite Point common stock, beginning on October 19, 2017 and continuing up to and including the Dividend Date, a “when issued” market will exist (NYSE: GPMT WI) for the shares of Granite Point common stock being distributed in the Stock Dividend. “When issued” trading refers to a sale or purchase made conditionally on or before a Dividend Date because the securities have not yet been distributed. If you own shares of Two Harbors common stock on the Record Date, your shares will have an entitlement to receive shares of Granite Point common stock in the Stock Dividend. You may trade this entitlement to receive Granite Point common stock on the when issued market without trading your shares of Two Harbors common stock. Starting November 2, 2017 (the business day following the Dividend Date), the when issued market for Granite Point common stock will no longer be available.

HOLDERS OF TWO HARBORS COMMON STOCK ARE ENCOURAGED TO CONSULT THEIR BROKER OR FINANCIAL ADVISOR REGARDING THE SPECIFIC IMPLICATIONS OF TRADING IN THE COMMON STOCK OF EITHER TWO HARBORS OR GRANITE POINT PRIOR TO OR ON THE DIVIDEND DATE.

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How did the Stock Dividend affect the number of shares of Two Harbors common stock I held?

The number of shares of Two Harbors common stock that you held did not change as a result of the Stock Dividend.

Following the Stock Dividend, we effected a one-for-two Reverse Stock Split, which impacted the number of shares of Two Harbors common stock that you held. See the question titled “What happened to my Two Harbors common stock as a result of the Reverse Stock Split?”

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What are the U.S. federal income tax consequences of the Stock Dividend to Two Harbors common stockholders?

Two Harbors intends to treat the Stock Dividend as a taxable distribution to its stockholders for U.S. federal income tax purposes, including for purposes of the U.S. federal tax withholding rules. Accordingly, the receipt of shares of Granite Point common stock by holders of Two Harbors common stock in the Stock Dividend is expected to be taxable for U.S. federal income tax purposes.

Each stockholder will be treated as receiving a distribution in an amount equal to the fair market value on the date of the Distribution of (i) the Granite Point Stock received plus (ii) the fractional share of Granite Point Stock sold by the distribution agent on such stockholder’s behalf. A stockholder will have a basis in the fractional share of Granite Point Stock that is to be sold by the distribution agent on such stockholder’s behalf equal to the fair market value of such fractional share. Upon the sale of such fractional share by the distribution agent on behalf of a stockholder, such stockholder generally will recognize short-term capital gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount realized and the stockholders basis in the fractional share. The number of shares from the Stock Dividend to be received by certain Two Harbors common stockholders, including non-U.S. stockholders, will be reduced in connection with any applicable withholding taxes.

HOLDERS OF TWO HARBORS COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. TAX CONSEQUENCES OF THE STOCK DIVIDEND.

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As a registered holder of Two Harbors common stock, how did I receive my shares of Granite Point common stock?

Registered holders of Two Harbors common stock who were entitled to receive shares of Granite Point common stock through the Stock Dividend received uncertificated shares registered in book-entry form at Wells Fargo Shareowner Services, as transfer agent for Granite Point, through the direct registration system. Direct registration system statements reflecting share ownership of such Granite Point shares will be distributed by Wells Fargo Bank, N.A. shortly after the Dividend Date. Any amounts payable for cash in lieu of any fraction of a share of Granite Point common stock will also be transmitted by Wells Fargo Bank, N.A. by check.

For additional information, registered stockholders in the United States and Canada should contact the distribution agent for the Stock Dividend, Wells Fargo Bank, N.A., at (800) 468-9716 or (651) 450-4064 from outside the United States and Canada.

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What if I held my shares of Two Harbors common stock through a broker, bank or other nominee?

Holders of Two Harbors common stock who held their shares through a broker, bank or other nominee would have had their brokerage account credited with shares of Granite Point common stock, less any such shares as may be withheld in respect of withholding taxes. For additional information, those stockholders should contact their broker, bank or other nominee directly.

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I hold stock certificates reflecting my shares of Two Harbors common stock. Should I send them to the distribution agent or to Two Harbors in connection with the Stock Dividend?

No. You do not need to send your stock certificates to the distribution agent or to Two Harbors in connection with the Stock Dividend. You will not receive stock certificates representing the shares of Granite Point common stock in connection with the Stock Dividend. Instead, the shares of Granite Point common stock distributed to Two Harbors common stock certificate holders in the Stock Dividend will be issued as uncertificated shares registered in book-entry form at Wells Fargo Bank, N.A. through the direct registration system.

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Reverse Stock Split

What is a reverse stock split?

A reverse stock split is a corporate action in which a company proportionately reduces the total number of its authorized and outstanding shares.

Two Harbors is effecting a one-for-two Reverse Stock Split, which means that every two shares of common stock will be converted into one share of common stock. The Reverse Stock Split applies to all shares of Two Harbors common stock. Accordingly, after the Reverse Stock Split, the aggregate number of shares of Two Harbors common stock issued and outstanding will be one-half of the number that was outstanding immediately before the Reverse Stock Split, subject to a reduction in the total number of shares as a result of cash payments made in lieu of the issuance of fractional shares. See the question titled “How are fractional shares of Two Harbors common stock being treated in the Reverse Stock Split?”

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When did the Reverse Stock Split become effective?

The Reverse Stock Split became effective at 5:01pm Eastern Time on November 1, 2017 (the “Effective Time”). At the Effective Time, every two issued and outstanding shares of Two Harbors common stock were converted into one share of Two Harbors common stock, subject to a reduction in the total number of shares as a result of cash payments made in lieu of the issuance of fractional shares. See the question titled “How were fractional shares of Two Harbors common stock treated in the Reverse Stock Split?”.

The Reverse Stock Split took place following the Stock Dividend of Granite Point shares, and had no impact on the Stock Dividend.

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Why did Two Harbors effecting a Reverse Stock Split?

The decision to effect the Reverse Stock Split was based on our expectation that, following the distribution of Granite Point common stock through the Stock Dividend, the market price and trading ranges for the shares of Two Harbors common stock will be significantly lower than the current market price and trading ranges. This is due to the fact that Two Harbors distributed all of the value of Granite Point to the holders of Two Harbors common stock through the Stock Dividend. We believe that effecting the Reverse Stock Split, which resulted in fewer shares of the Two Harbors common stock outstanding, is likely to (1) increase the market price and (2) improve the marketability and liquidity of Two Harbors common stock. There is significant market precedent for doing a reverse stock split concurrently with a distribution similar to the Granite Point Stock Dividend.

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What was the impact to Two Harbors' outstanding common stock?

Following the Reverse Stock Split, you owned one-half of the number of shares that you held prior to the Reverse Stock Split, although the shares you owned following the Reverse Stock Split continue to represent that same percentage of the total number of outstanding shares of Two Harbors common stock. Accordingly, the proportionate ownership of Two Harbors did not change as a result of the Reverse Stock Split.

For example:

  • You own 1,000 shares of Company X, which has 1,000,000 shares of common stock outstanding (or a 0.10% percentage ownership in the company).
  • After a 1-for-2 reverse stock split, you own 500 shares of Company X, which now has 500,000 shares of common stock outstanding (or a 0.10% percentage ownership in the company).
  • Before and after the reverse stock split, you had the same 0.10% ownership percentage of Company X.

Note that fractional shares were not be issued. See the question titled “How were fractional shares of Two Harbors common stock treated in the Reverse Stock Split?”

The Reverse Stock Split will have the effect of reducing the total number of Two Harbors’ issued and outstanding common stock by half, from approximately 349 million shares to approximately 175 million shares. As a result of the reduction in the number of shares of common stock, the price per share of Two Harbors common stock is expected to increase proportionately upon the completion of the Reverse Stock Split.

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What happened to my Two Harbors common stock as a result of the Reverse Stock Split?

Following the Reverse Stock Split, you owned one-half of the number of shares that you held prior to the Reverse Stock Split, although the shares you owned following the Reverse Stock Split will continue to represent that same percentage of the total number of outstanding shares of Two Harbors common stock. Accordingly, the proportionate ownership of Two Harbors did not change as a result of the Reverse Stock Split.

For example:

  • You own 1,000 shares of Company X, which has 1,000,000 shares of common stock outstanding (or a 0.10% percentage ownership in the company).
  • After a 1-for-2 reverse stock split, you own 500 shares of Company X, which now has 500,000 shares of common stock outstanding (or a 0.10% percentage ownership in the company).
  • Before and after the reverse stock split, you had the same 0.10% ownership percentage of Company X.

Note that fractional shares were not issued. See the question titled “How were fractional shares of Two Harbors common stock being treated in the Reverse Stock Split?”

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How were fractional shares of Two Harbors common stock treated in the Reverse Stock Split?

No fractional shares were issued in connection with the Reverse Stock Split. Instead, if the Reverse Stock Split conversion resulted in a new share total that included a fractional share, the stockholder of the fractional share was entitled to receive, in lieu of such fractional share, a cash payment in an amount that is equal to the volume weighted average price of Two Harbors common stock reported on the NYSE on November 1, 2017.

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What is the CUSIP number for Two Harbors common stock following the Reverse Stock Split?

Following the Reverse Stock Split, the CUSIP number for Two Harbors common stock changed to 90187B408. Two Harbors common stock continues to trade on the NYSE under the ticker symbol “TWO.”

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Were the number of shares of Granite Point Stock that I received in the Stock Dividend impacted by the Reverse Stock Split?

The Reverse Stock Split did not impact the number of shares of Granite Point Stock that you may have been entitled to receive in connection with the Stock Dividend, as the determination of the number of shares of Granite Point Stock that you may have been entitled to receive was made prior to the Effective Time of the Reverse Stock Split.

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What are the U.S. federal income tax consequences of the Reverse Stock Split to Two Harbors common stockholders?

The Reverse Stock Split will be a non-taxable event to stockholders, with the exception of cash in lieu of fractional shares. Upon the sale of such fractional share by the distribution agent on behalf of a stockholder, such stockholder generally will recognize short-term or long-term capital gain or loss, depending on such stockholder’s holding period of Two Harbors common stock, for U.S. federal income tax purposes equal to the difference, if any, between the amount realized and the stockholders basis in the fractional share. The cash in lieu of Two Harbors common stock to be received by certain Two Harbors common stockholders, including non-U.S. stockholders, will be reduced in connection with any applicable withholding taxes.

HOLDERS OF TWO HARBORS COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT.

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I hold stock certificates reflecting my shares of Two Harbors common stock. Should I send them to the distribution agent or to Two Harbors in connection with the Reverse Stock Split?

Yes. In connection with the Reverse Stock Split, holders’ stock certificates reflecting pre-Reverse Stock Split shares of Two Harbors common stock will be required send their stock certificates to the Exchange Agent handling the Reverse Stock Split in order to receive the new post-Reverse Stock Split shares of Two Harbors common stock. Following the Reverse Stock Split, the exchange agent will send all certificate holders a letter of transmittal detailing the process for exchanging your existing stock certificates. For additional information, certificate holders in the United States and Canada should contact the exchange agent, Wells Fargo Bank, N.A., at (800) 468-9716 or (651) 450-4064 from outside the United States and Canada.

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