Better.com, a digital mortgage lender backed by SoftBank, went public on Thursday via a SPAC merger with Aurora Acquisition Corp. However, the company’s debut was far from smooth, as its stock price crashed by more than 90% on the first day of trading. The company’s valuation dropped from $7.7 billion to $760 million, wiping out billions of dollars for its investors and employees.
A Zoom Call That Backfired
The dismal performance of Better.com’s stock was partly attributed to the controversial decision by its CEO Vishal Garg to fire 900 employees, or about 15% of its workforce, over a Zoom call in December 2021. The move sparked outrage and criticism from the public, as well as lawsuits from former employees who accused Garg of making false and misleading statements about the company’s financial situation and prospects.
Garg later apologized for his “poor handling” of the layoffs and admitted that he had made a mistake. He also said that he had undergone “a lot of leadership training” to improve his communication and empathy skills. However, his reputation and credibility were already damaged by the incident, which also raised questions about the company’s culture and ethics.
A Tough Market for Mortgage Lenders
Another factor that contributed to Better.com’s stock slump was the challenging market conditions for mortgage lenders in general. The industry has been facing lower demand and higher competition, as interest rates rise and refinancing activity slows down. According to the Mortgage Bankers Association, mortgage originations are expected to decline by 14% in 2023 compared to 2022.
Better.com, which claims to offer faster and cheaper mortgages through its online platform, has also faced regulatory hurdles and operational issues. The company has been sued by several states for allegedly violating consumer protection laws and engaging in deceptive practices. The company has also struggled to maintain its service quality and customer satisfaction, as evidenced by its low ratings on Trustpilot and Consumer Affairs.
A Hopeful Future for Better.com?
Despite the disappointing debut, Garg remains optimistic about the future of Better.com. He said that the company is disrupting the U.S. housing market by providing more access and affordability to homebuyers. He also said that the company is expanding into other areas such as insurance, title, and real estate services.
Garg also defended his decision to go public via a SPAC merger, saying that it was the best option for the company given the market volatility and uncertainty. He said that the SPAC deal allowed the company to raise more capital and retain more control over its vision and strategy.
However, some analysts are skeptical about Better.com’s prospects, especially in light of its poor governance and execution. They also warn that the company may face more legal troubles and regulatory scrutiny, as well as increased competition from other players in the industry.