In defiance of the gloomy home-buying landscape, online mortgage lender Better.com has bravely forged ahead with its long-anticipated plans to go public. The New York-based startup, founded in 2014, recently confirmed the completion of its merger with Aurora Acquisition Corp., a special-purpose acquisition company, effectively marking its debut in the public market. Trading under the ticker symbol "BETR," Better is set to commence its public trading journey on the Nasdaq this Thursday.
The public listing follows a challenging two-year period during which the company initially filed to go public, only to be plagued with problems such as underwhelming earnings and controversial layoffs. Despite these hurdles, Better’s CEO, Vishal Garg, confidently asserts that post-merger, the company is poised to be one of the top five best-capitalized mortgage firms in the United States, hinting at a vast market opportunity waiting to be tapped.
Better.com Goes Public Despite Difficult Mortgage Market
Despite a challenging environment for home buying, online mortgage lender Better.com has moved forward with its long-awaited plans to go public. The New York City-based startup announced on Wednesday that it has completed its merger with Aurora Acquisition Corp., a special-purpose acquisition company. As a result, Better.com will begin trading on the Nasdaq under the ticker symbol “BETR” starting from Thursday.
Overcoming Past Challenges
This public listing comes two years after Better.com initially filed to go public – a move that was delayed due to issues including lackluster earnings and public backlash over layoffs. However, with the deal now complete, Better.com’s CEO Vishal Garg claims that the company will be "one of the five best capitalized mortgage companies in America" with a "tremendous market opportunity" ahead.
Tough Times for the Mortgage Industry
The mortgage lending industry has faced significant challenges over the past year due to increased interest rates by the U.S. Federal Reserve. This move, aimed at controlling inflation, indirectly led to a rise in mortgage rates and a subsequent decline in home buying and refinancing activities. According to the Mortgage Bankers Association (MBA), lenders even reported losses on each loan they originated in the first quarter of 2023. While these losses have since decreased, mortgage lenders still struggle to attract business amid high rates and low inventory of homes.
Signs of Improvement
Despite the tough conditions, there have been some positive signs. Marina Walsh, vice president of industry analysis at the MBA, noted that the second quarter of 2023 brought less severe production losses and strong net servicing financial income. She also mentioned that most mortgage companies managed to turn an overall profit.
Seeking Fresh Capital and New Opportunities
Against this backdrop, Better.com has been able to secure more than $500 million in additional capital from SoftBank. The merger with Aurora gives the company access to a total of $565 million in fresh capital, including a $528 million convertible note from SoftBank affiliates and additional common equity from NaMa Capital-affiliated funds. Garg plans to use this capital to expand the company’s offerings, invest in machine learning and artificial intelligence models, and explore potential acquisitions.
Future Outlook: Post-Public
With interest rates expected to drop in the future, Better.com is positioning itself to take advantage of the potential market shift. Garg anticipates that their One Day Mortgage product will perform well once refinancing becomes viable again.
Garg, who faced criticism for his handling of large-scale layoffs in 2021, has acknowledged the need for better leadership. He stated that the company has spent two years in leadership training and coaching to ensure more considered decision-making.
Better.com’s decision to push forward with its public listing despite a bleak outlook for the mortgage industry demonstrates its confidence in its business model and future prospects. With additional capital and an expected shift in the market, Better.com is positioning itself for growth. However, the company will need to maintain strong leadership and navigate the challenges of a difficult market to succeed.