FAQ

On November 1, 2022 (the “Effective Time”), TWO effected a 1-for-4 reverse stock split on all outstanding shares of the company’s common stock.  Following the reverse stock split, the aggregate number of outstanding shares of TWO common stock was one-fourth of the number that was outstanding immediately before the reverse split, subject to a reduction in the total number of shares resulting from cash payments to be made to stockholders in lieu of the issuance of fractional shares.

No fractional shares were issued in connection with the reverse stock split. Instead, each stockholder of record holding fractional shares was entitled to receive, in lieu of such fractional shares, cash in an amount based on the volume weighted average price of the company’s common stock on the NYSE on November 1, 2022. The reverse stock split applied to all of the company’s authorized and outstanding shares of common stock as of the Effective Time.

Why did TWO approve a reverse stock split?

The company’s Board of Directors believes that increasing the market price per share of the company’s common stock through the reverse stock split may broaden the range of potential investors, thereby potentially improving the market for and liquidity of the company’s common stock.

What is a reverse stock split? How does it impact the value of shares?

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

In a 1-for-4 reverse stock split, every four issued and outstanding shares of a company’s common stock are converted into one share of common stock, resulting in a proportionate increase in the stock price. Following the reverse stock split, a stockholder will have one-fourth the number of shares as before the split and the market value of each share will be four times the pre-split value. 

For example, if a stockholder owned 100 shares of Company X at $50 per share for a total value of $5,000 prior to a 1-for-4 reverse split, that stockholder would own 25 shares at $200 per share for a total value of $5,000 immediately following the reverse split.

Equity Value Example:	Pre-Reverse Stock Split	Post-Reverse Stock Split
Number of Shares Held	100 Shares	25 Shares
Stock Price	$50	$200
Value	100 x $50 = $5,000	25 x $200 = $5,000

How will the reverse stock split impact future common stock dividends?

The declaration or payment of any future stock dividends are authorized solely at the discretion of the TWO Board of Directors and will depend on factors such as the company’s REIT taxable income, financial condition, maintenance of REIT status and other factors that the Board of Directors may deem relevant from time to time.

Using the prior hypothetical example, if, after executing a 1-for-4 reverse split, Company X declared a dividend equivalent to the pre-reverse split dividend, the post-reverse split dividend would increase proportionately. 

Dividend Example:	Pre-Reverse Stock Split	Post-Reverse Stock Split
Number of Shares Held	100 Shares	25 Shares
Quarterly Dividend	$1.00	$4.00
Value	100 x $1.00 = $100	25 x $4.00 = $100

What impact did the stock split have on the authorized shares of TWO common stock?

In connection with the reverse stock split, the number of shares of common stock that the company is authorized to issue decreased from 700 million to 175 million.

What impact did the stock split have on TWO convertible senior notes?

The conversion rate of TWO 6.25% Convertible Senior Notes due 2026 was automatically be adjusted as a result of the reverse stock split in accordance with the terms of the applicable indenture governing such convertible notes. No action on the part of a holder of any convertible notes is required in order to affect the adjustment.

What is the difference between a registered holder and a beneficial owner?

Stockholders that hold shares directly with the company’s transfer agent, Equiniti Trust Company (“Equiniti”), are considered registered stockholders. Stockholders that hold their shares through a brokerage firm, bank, trust or other similar organization are considered beneficial stockholders.

Do I need to take any action?

Beneficial Holders:

• Beneficial holders with shares held in a brokerage, bank, trust or other similar institutions do not need to take any action to receive post-split shares.
• Brokerage firms, banks, trusts and other similar institutions we're instructed to effectuate the reverse stock split for the beneficial owners of TWO common stock. However, those organizations may have implemented different procedures than those to be followed for registered stockholders for processing the reverse stock split, particularly with respect to the treatment of fractional shares.
• You may contact your financial institution for additional information.

Registered holders whose shares are held electronically in book entry form:

• Registered holders with shares held only electronically in book-entry form and a deliverable physical address on the records of Equiniti do not need to take any action to receive post-split shares.
• You will automatically receive, at your address of record, a transaction statement from Equiniti indicating the number of post-split shares held following the implementation of the reverse stock split, and, if applicable, a cash payment in lieu of any fractional shares.

Registered holders whose shares are held in certificate form:

• Registered holders of certificated shares of TWO common stock will receive a letter of transmittal from Equiniti, which contains instructions on how to surrender certificates representing pre-reverse stock split shares. Such shares will become book-entry shares post-reverse stock split. This means that your shares will be electronically credited to an account registered in your name on the books of TWO, which are maintained by Equiniti.
• Stockholders should not send in their pre-reverse stock split certificates unless they are accompanied by a completed letter of transmittal. The letter of transmittal also includes a lost securities affidavit with respect to any certificate that cannot be located.
• In order to receive new shares of TWO common stock, cash payments in lieu of any fractional shares, and any dividends or other distributions that the Company may declare in the future, stockholders must return these certificated shares of the TWO common stock or a lost securities affidavit.
• The completed letter of transmittal together with the certificate(s) for the shares of the Company’s common stock being surrendered (or the completed lost securities affidavit, if applicable) should be returned to Equiniti at the following address:

By Mail to:
EQ Shareowner Services
Corporate Actions Department
P.O. Box 64858
St. Paul, MN 55164-0858

By Overnight Courier to:
EQ Shareowner Services
Corporate Actions Department
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120

What is the CUSIP number for TWO common stock following the reverse stock split?

At market open on November 2, 2022, the company’s common stock continued trading on the NYSE under the symbol “TWO” but was assigned a new CUSIP number: 90187B 804.

What are the U.S. federal income tax consequences of the reverse stock split to TWO common stockholders?

The reverse stock split is 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 recognized short-term or long-term capital gain or loss, depending on such stockholder’s holding period of TWO 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 common stock received by certain TWO common stockholders, including non-U.S. stockholders, may have been reduced in connection with any applicable withholding taxes.

How do I determine my tax basis after the reverse stock split? 

Upon the Effective Time, every four shares of TWO common stock were automatically converted into one share of common stock. As a result, stockholders must allocate the aggregate tax basis in their shares held immediately prior to the reverse stock split among the shares held immediately after the reverse stock split, including consideration of any fractional shares for which cash is received. Additional information will be included in the U.S. Internal Revenue Service Form 8937, Report of Organizational Actions Affecting Basis of Securities, prepared by TWO. This form will be posted to the company’s Investor Relations website within 45 days from when the reverse stock split becomes effective.

Stockholders should consult their tax advisors to determine the tax impact of this transaction with respect to their individual facts and circumstances.

Who should I contact if I have additional questions about my shares?

If you have questions about the reverse stock split, stockholder records, stock transfers, stock certificates or other stock-related inquiries please contact:

Equiniti Trust Company
P.O. Box 64856
St. Paul, MN 55164-0856
T: 651-450-4064
https://www.shareowneronline.com

HOLDERS OF TWO 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.