Better.com has found itself at the center of a lawsuit claiming the online mortgage company duped investors into keeping its aspirations of going public afloat.
On Tuesday, Sarah Pierce, Better’s former executive vice president for sales and operations, filed a lawsuit against the New York-based company. She alleges that Better.com and CEO Vishal Garg misrepresented its business and prospects so it could keep its planned SPAC deal moving forward.
According to Wall Street Journal reports, the planned merger was delayed late last year and has yet to close.
Pierce, who parted ways with Better in February for undisclosed reasons, alleges in the suit that she was driven out of her role after she repeatedly raised concerns about misleading statements Garg had made regarding the company’s financial standing and forecasts.
Pierce worked at Better for nearly six years before her departure. While there, she supervised all of the company’s business and 85% of its workforce—which surpassed over 10,000 people.
Pierce claimed that she brought her suspicions and concerns to Garg and other Better leaders while she was still with the company but was retaliated against and scapegoated for the Better’s deteriorating financial state amid a wave of bad press over a now-infamous Zoom layoff.
“On December 1, 2021, CEO Garg terminated 900 employees via a Zoom call in which he disregarded company-approved talking points that specifically categorized the event as a reduction in force and made the event about himself,” read an excerpt from the lawsuit.”
It went on to state, “In an attempt to deflect blame, CEO Garg continued to state that the terminated employees had stolen from the company to leadership, to the press, and on social media forums such as Blind. He also began to state to the Board of Directors and investors that the company would achieve profitability in Q1 2021, despite Pierce and other senior leaders explicitly stating that this outcome was not possible.”
In response to RISMedia inquiries about the lawsuit, Better.com’s lawyer says, “We don’t comment on ongoing litigation. However, we have reviewed the claims in the complaint and strongly believe them to be without merit. The company is confident in our financial and accounting practices, and we will vigorously defend this lawsuit.”
Pierce’s lawsuit marks the latest blow to the online mortgage company, which has been under scrutiny since 2021. After a pair of botched layoff attempts and several executive departures, Better has struggled with its public image following Garg’s actions in December 2021.
As 2022 has unfolded, more details have come to light regarding Better’s troubles.
The company has admitted that “company culture” issues have contributed to its performance and financial decline in previous documents filed with the U.S. Securities and Exchange Commission.
In one document, Better estimated on a preliminary basis that its 2021 Q4 revenue dropped between 17% to 22% sequentially versus the previous quarter. The company also forecasted an annual revenue decline of up to 29% compared to 2020.
It reported a net loss of $111.1 million for the nine months ending on September 30, 2021. It estimated an annual net loss between $167 million and $182 million based on a preliminary unaudited forecast in the filing.
In a leaked video of a town hall meeting that immediately followed the company’s infamous Zoom-call events, Garg admitted that he made several mistakes within the past two years, including over-hiring and bringing in “the wrong people.”
“I was not disciplined over the past 18 months,” he said in the video. “We made $250 million last year, and we probably pissed away $200 million. We probably could’ve made more money last year and been leaner, meaner and hungrier.”
In the same video, Garg referred to his vision of a “leaner and meaner” company that would spend time “grinding the business forward” in what he characterized as a bloodbath in the mortgage industry.
Better was among several mortgage lending companies that benefited from the past two years of hyperactive home buying and refinancing activity under record-low mortgage rates, resulting in a surge in hiring and production.
It’s also among the list of companies that have been downsizing its staff after a glut of hiring to account for demand in the pandemic.
This is a developing story.
Jordan Grice is RISMedia’s associate online editor. Email him with your real estate news ideas at firstname.lastname@example.org.