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Better.com Makes Nasdaq Debut via SPAC Merger, Share Price Declines 90% at Opening Bell

Following its long-awaited Special Purpose Acquisition Company (SPAC) merger, Better Home & Finance, or Better.com, made its debut on Thursday, August 24, 2023, at the New York Stock Exchange, witnessing an appalling outcome.


SPACs, which raise money through an IPO specifically with the purpose of acquiring an existing running company, have grown to be the preferred option for experienced management teams and sponsors to take firms public. Better.com’s SPAC merger involved a $750 million capital infusion, with $550 million through a subscription agreement with Softbank and an additional $100 million subject to a $100 million contribution from investment firm Novator.


Established in 2016, the New York-based digital mortgage company saw its first boom during the pandemic and was able to push its fees and commissions to nearly zero due to record-low mortgage rates and surging demand in the real estate sphere. In 2021, Better.com was valued at an impressive $7.7 billion, receiving funding of $1.5 billion from prominent investors such as SoftBank and Goldman Sachs. The company also garnered backing from other investors, including Kleiner Perkins, Moderne Ventures, Alumni Ventures, and 1/0 Capital.

After the pandemic boom, stunning valuation, and funding, Better.com announced its plan to go public via a SPAC merger with Aurora Acquisitions Corp. in May 2021. The company was faced with severe hardships in the second half of 2021 as mortgage rates reached the highest levels seen in the last two decades and the sharp squeeze in the market brought the company’s revenue spiralling down.


The key financial advisors advising Better.com in its SPAC merger at the time, Citigroup and Barclays, decided to step down as the company refused to share audit reports of its accounts. Amidst the struggling times, CEO Vishal Garg faced significant backlash in December 2021 after he laid off 900 employees, around 15% of the workforce, over a Zoom call. The merger talks with Aurora came to a halt as the digital mortgage lender became subject to the SEC’s scrutiny of its management, the dismissal of over 7,000 employees, and declining revenue.


Better.com’s SPAC merger was aimed at revolutionising the mortgage market by leveraging its expertise in digital lending. The anticipated synergies included using its technology to speed up and reduce the cost of the mortgage application process for borrowers and launching the business into a new phase of expansion and innovation. Just a day before the merger, Aurora's share price closed at $17.44 on Wednesday, August 23rd. On its first day, the merged entities saw a shocking 90% decline in their share price at the opening bell, closing at $1.15 on Thursday, August 24th, and $1.19 on Friday, August 25th.


The next chapter for Better.com is uncertain, but it is marked by increased capital and a new role as a public entity. As the company adapts to its ability to raise funds by selling stocks, the road ahead will be challenging but not insurmountable. Despite the chaos, the CEO remains optimistic about regaining investors' trust, citing the capital infusion from SoftBank as a leading factor in its SPAC merger. The merged entity envisions Better.com’s technology playing a pivotal role in turning the market around by 2024, enabling faster and more affordable mortgage solutions.


Written by: Mohammed Mukadam


Sources: Business Insider, Forbes Advisor, Yahoo Finance, FinTech Futures, TechCrunch




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