If you’ve followed the rollercoaster ride that the mortgage industry has been going through, then you’ve probably acquainted yourself with the plight of Better.com. The online mortgage lender has struggled with the shrinking market, but it has also had to weather a storm of scrutiny while trying to go public.
That goal will take longer than expected as a recent filing with the Securities and Exchange Commission (SEC) indicates that Better and blank-check firm Aurora Acquisition Corp has extended the deadline for their SPAC merger agreement to close.
Better’s planned SPAC merger with Aurora has been in the works since May 2021, but as mortgage rates climbed and the refinance market shrank, the online lender has had to make some changes along the way, including pushing back its deadline for the deal to close.
The deal, valued at $7.7 billion, was supposed to close by December this year after it was already extended from February. However, the two companies have now agreed to push the deadline to March 8, 2023.
Better is also weighing other possible options that could make its public offering happen based on the SEC filing.
“We are considering all capitalization options so that we can continue to make homeownership simpler, faster—and, most importantly, more accessible for all Americans,” said a Better.com spokesperson in a statement.
Due to the extension, Better will reimburse Aurora a sum not to exceed $15 million for “certain reasonable and documented expenses.” Both companies also agreed to waive exclusivity provisions so that Better can seek “alternative financing structures” with SB Northstar LP.
While Aurora indicated in its filing that it “strongly believes in Better” and the digital lenders market strategy, it also acknowledged that there is a chance that the deal won’t get done.
“Although Aurora and Better remain committed to completing the Business Combination, Aurora and Better are in discussions regarding alternative financing arrangements for Better,” Aurora said in the filing.
The company also stated, “there is no assurance that the business combination will be completed or that the parties will be able to agree and effect any such alternative financing arrangements.”
If Better doesn’t meet its March 8 deadline, Aurora signaled that it would cease all operations, quickly dissolve and redeem its public shares, leaving Better as a private company.
This outcome wouldn’t fare well for the startup, which would lose out on three-quarters of a billion dollars that Softbank and Novatar Capital previously committed late last year.
Following that cash injection, Better agreed to issue the same amount in bridge notes that were convertible to Class A common stock of Aurora to SB Northstar LP and Novator.
Aurora, Better and Novator also extended the maturity date of the bridge notes held by Novator to March 8, 2023, which would be subject to SB Northstar LP consenting to an extension of its own, according to the SEC filing.
As the mortgage industry transitioned from its sugar high of the past two years, companies struggled under the shift, particularly those that relied on refinance business.
Through the ups and downs of the shifting market, Better has also been trying to keep its plans of going public afloat. That’s been coupled with a mix of bad press for several mishandled waves of layoffs, starting with an infamous incident where CEO Vishal Garg fired 900 employees abruptly over Zoom.
The company recently implemented its fourth round of layoffs late last month. According to TechCrunch reports, Better fired “at least 250 or more” employees across all company departments.
The online lender has been hemorrhaging workers since December last year as it has tried to rightsize and reduce expenses amid the shrinking refinance mortgage market that gut-punched Better and a list of other brands that have followed suit with labor reduction.
“We’re making prudent decisions to adjust to market dynamics so that we can continue to serve our customers for the long-term,” said a Better spokesperson.
Aside from its botched layoffs, the online lender has also found itself on the receiving end of a whistleblower lawsuit filed by Better’s former head of sales and operations, Sarah Pierce, in June.
The lawsuit, which alleged that Garg made misleading statements regarding Better’s financial standing and market forecasts, sparked the SEC to investigate Aurora and Better’s operations, related-party transactions, and “certain matters relating to certain actions and circumstances” of the startup’s CEO.
