By Hannah Lang
(Reuters) – SoftBank-backed Better, the digital mortgage lender which hit the headlines in 2021 after laying off 900 employees on Zoom, is set to go public on the Nasdaq stock exchange on Thursday via a merger with a blank-check company, the company said Wednesday.
The listing caps a rocky two years for the company which delayed the deal multiple times amid regulatory scrutiny and slowing mortgage demand, and will test market appetite for home lenders as U.S. Federal Reserve rate hikes continue to weigh on the housing market.
The deal will provide Better with an infusion of $550 million from SoftBank which it will use to expand its mortgage product offerings in anticipation of a boom in demand for refinancings next year, when rates are expected to start falling, Better executives said.
“We think that this is a really great time for us to be out there, capitalized with an additional $550 million from SoftBank that will enable the company to continue to innovate and serve its customers,” CEO Vishal Garg in an interview.
Shares in the company will trade under the ticker BETR.
The company is going public as U.S. mortgage rates continue to surge, with the popular 30-year fixed rate last week hitting the highest level in more than 21 years. U.S. home builder confidence weakened in August, as mortgage rates and stubbornly high housing prices discouraged prospective buyers.
Better planned to go public via a $6 billion special-purpose acquisition company (SPAC) merger with Aurora Acquisition Corp. in 2021, but delayed the deal amid a U.S. Securities and Exchange Commission (SEC) inquiry and multiple rounds of layoffs, regulatory filings show.
The SEC last year requested information on Garg’s business transactions and allegations made in a lawsuit that Garg and Better provided misleading statements to investors about Better’s financial prospects and performance.
The SEC informed Better and Aurora this month that it had concluded its probe and would not be recommending an enforcement action, according to a regulatory filing.
Better enjoyed huge growth during the onset of the COVID-19 pandemic when mortgage rates cratered, notching more than $850 million in revenue in 2020, filings show. But it has struggled as rates have risen, reporting a net first quarter loss of $89.9 million in July.
It has conducted multiple rounds of layoffs since the SPAC deal was announced, including infamously laying off 900 employees via Zoom in December 2021 after which Garg took a break and worked with an executive coach. He later apologized.
Garg says the company is now “much more mature.”
“We’re much more considerate of all constituents, whether they be regulators, the press, our employees,” he said.
When interest rates fall, Better expects huge demand for cash-out refinancings, which it says it will be able to deliver in one day. Earlier this year, Better.com launched a one-day mortgage product, allowing customers to get pre-approved, lock in a rate and get a mortgage commitment letter within 24 hours.
The company expects to share more details on adoption rates when it reports earnings for the second quarter.
(Reporting by Hannah Lang in Washington; Editing by Michelle Price and Mark Potter)