Better Home & Finance experienced a major setback during its Nasdaq debut, with shares losing over 90% of their value. The technology-based direct mortgage lender saw its market capitalization drop by a staggering $13 billion. The company, now known as Better Home & Finance Holding Company, went public after merging with a special purpose acquisition company (SPAC), Aurora Acquisition Corp. However, the trading value of Better’s shares fell sharply from $23.80 before markets opened to just $1.58 at the opening bell. Despite a slight recovery to $1.15 per share at the closing bell, the company’s market capitalization stood at approximately $922 million, compared to Aurora’s $14 billion valuation.
This disappointing result can be attributed to several factors. Firstly, the timing of the company’s IPO was unfavorable for mortgage lenders. Secondly, the merger with the SPAC led to a significant increase in the number of shares outstanding, diluting the value of individual shares. Additionally, early share redemptions from Aurora shareholders further impacted the company’s proceeds from the merger.
Better Home & Finance’s CEO, Vishal Garg, had previously stated that early redemptions were no longer a concern as the merger would bring in over $500 million in fresh capital, including convertible notes from affiliates of SoftBank. However, it remains to be seen how the company will navigate this setback.
It is worth noting that other mortgage lenders have faced challenges in recent years. LoanDepot, which took a more traditional route to its IPO, experienced losses of $610 million in 2021 and had to make significant job cuts. United Wholesale Mortgage, the largest mortgage lender in the country, went public through a SPAC merger in 2020 and currently has a market capitalization of over $17 billion. Rocket Companies, another mortgage lender, went public through a traditional IPO in 2020 and is valued at over $20 billion.
The future of Better Home & Finance remains uncertain. While the company had a strong mortgage production of $58 billion in 2021, it saw a sharp decline of 80% in 2022 due to rising interest rates. The company had to lay off a significant number of employees and rework the terms of the SPAC merger to address these challenges.
Overall, the mortgage industry is facing rapid changes and challenges. Only time will tell how Better Home & Finance will adapt and recover from its disappointing Nasdaq debut.
