The digital mortgage platform, Better.com intends to go public by integrating with a Special Purpose acquisition company (SPAC) in Q4, 2021. This announcement took place on 11th May, when the company reported that the contract is valued at approximately $8 billion.
Better.com has agreed to collaborate with Aurora Acquisitions Corp., a Novator Capital-sponsored blank check corporation. It recently received $500 million from SoftBank Group. Another $1.3 billion will be added through the Private Investment in Public Equity (PIPE) offering. The reports speculated following the release that Better might eventually wind up putting $400 million of that money with other investors. Novator would contribute the remaining $200 million of the $1.5 billion PIPE.
The CEO of the business, Mr. Vishal Garg, was very glad for this affiliation.
He believes that this deal marks the beginning of a new exciting phase in Better's history. Garg says that the purchase generates investment capital to fuel the company's growth. It will help them accomplish their goal of making homeownership easier, quicker, more affordable, and available for all American citizens and others.
According to the statement, Better.com, which was created in New York in 2016, will have a post-equity valuation of $7.7 billion after the takeover. Even though the lender's performance is currently straggling behind its core rivals and heavily reliant on the refinancing industry, this deal would make it one of America's most highly regarded nonbank mortgage brokers (after United Wholesale Mortgage and Rocket Mortgage).
Like other lending companies, Better enjoyed a lot of success in property investment and refinancing activity as interest rates fell to record lows during the pandemic. It provided $24.2 billion in loans in the previous year, a 490% increase from 2019. The firm declares it has sold 7.7 billion dollars in title insurance and 1.4 billion dollars in house policy. Better produced around $850 million in sales in 2020 with around $250 million in income. As per the reports, Better.com made approximately $14 billion during its first phase of 2021.
Better.com was designed from the roots up to be completely digital, unlike many existing lenders incorporating technology in fits and starts.
It has a solely in-house loan origination team that does not function on commission. The startup claims that its labor costs are 57% less than the average and that its loan officers close 16.2 loans each month, in contrast to the industry average of 7.1. The company is officially accredited in 47 states as well as the District of Columbia.
However, after a scathing report on bullying, there have also been genuine concerns about corporate success. Furthermore, it's unclear if Better.com will prosper in a higher-rate setting, where refinancing business declines and lenders depend on a human network of dispersed retail loan officers or realtors to initiate mortgage business. It's also unknown how investors would respond to the IPO of yet another mortgage firm.
Better's current shareholders will receive $950 million in cash and the rest in new Better securities. They can choose between receiving cash or stock, with proration based on whether cash votes total more than or less than $950 million. Some shareholders have pledged to take cash for at least a fraction of their shares, while others, such as Vishal Garg, have pledged to take only stock. After providing the $950 million cash consideration, the outstanding settlement proceeds of roughly $778 million could be used for general corporate purposes after meeting contract expenditures.
Vishal Garg and the current board will lead the company, with Aurora Acquisition CIO Prabhu Narasimhan joining the executive committee. Its financial advisor is BofA Securities, and Aurora's is Barclays. Their legal advisers are Ropes & Gray LLP, Baker McKenzie LLP, and Sullivan & Cromwell LLP.