Sometimes things go better, sometimes things go worse.
Other times a mortgage lender goes public just as new American mortgage applications slump to the lowest level in 28 years.
Better Home & Finance Holding’s share price evaporated Thursday, falling more than 93% on the day of its public trading debut on the Nasdaq from an opening above $17 to just $1.15 at the close.
The firm was taken public by special purpose acquisition company (SPAC) Aurora Acquisition Corp in a deal backed by SoftBank, but its road to get there was long and rocky.
The deal was announced in 2021 when mortgage rates had fallen dramatically thanks to Covid-19. In fact, Better reported more than $850 million in revenue in 2020, according to filings.
But as rates rose, Better struggled to keep pace. Then, in December 2021, the company infamously laid off 900 of its employees on a Zoom call.
Most recently, Better reported a first-quarter net loss of $89.9 million in July, as mortgage rates continued to rise and demand for home loans has dipped accordingly.
The 30-year fixed mortgage rate hit its highest level since 2000 last week, which in turn dropped mortgage applications to a 28-year low, according to the Mortgage Bankers Association.
Then there’s the matter of potential regulation of SPACs from the US Securities and Exchange Commission. Low interest rates led to a SPAC boom, and one of the deals that caught the body’s attention was Better and Aurora's.
Last year, the SEC requested information on Better CEO Vishal Garg’s business transactions and allegations made in a lawsuit that he and Better provided misleading statements.
Even though the body ultimately concluded its probe earlier this month with a decision not to recommend enforcement action, the process delayed Better from getting to the public markets when mortgage rates were more advantageous.
Looking ahead, Better has $550 million from SoftBank at its disposal thanks to the deal, which Garg said the company plans to use to expand its mortgage product offerings, according to reporting from Reuters.
Things could also improve in 2024 if the Federal Reserve reverses its current tightening cycle and begins cutting interest rates, which would likely also lower mortgage rates.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
Follow him on Twitter @andrew_kessel