Aug. 24 (Reuters) – Shares of Better Home & Finance Holdings (BETR.O) plunged more than 93% Thursday as investors snubbed the online mortgage lender, which went public through a blank-check merger by the time it arrived. Which mortgage interest rates to two. The highest contract levels.
Backed by SoftBank (9984.T), Better completed its merger with Special Purpose Acquisition Company (SPAC) Aurora Acquisition Corp, capping a tough deal that was first announced in 2021 but delayed amid regulatory scrutiny and layoffs at Better.
The company made headlines in December 2021 after it laid off 900 employees via Zoom, and has since seen its profits plummet as high mortgage rates dampened demand for home loans.
Aurora went public in March 2021. Shares of Better Home & Finance Holding Co., the newly combined entity, ended the session down 93.4% at $1.15.
SPACs are shell companies that raise funds through public listing with the goal of acquiring a private company and taking it public. Investors in a SPAC typically have the option to redeem their pre-merger shares.
In Better’s case, 95% of Aurora shareholders redeemed their shares, leaving the SPAC trust account with nearly $24 million at the end of June from about $283 million at the end of last year, filings show. Usually, a small amount of shares available to the public makes a stock vulnerable to fluctuations.
The company did not immediately respond to a request for comment on share price action.
Chief Executive Vishal Garg told Reuters in an interview earlier this week that completing Better’s merger with Aurora would provide the mortgage lender with a $550 million infusion from SoftBank, which it will use to expand its mortgage product offering.
The filings show that the company better enjoyed explosive growth during the start of the COVID-19 pandemic when mortgage rates collapsed, and generated more than $850 million in revenue in 2020. But it struggled with rising interest rates, posting a first-quarter net loss of $89.9 million. dollars in July.
US mortgage interest rates continue to rise, the Mortgage Bankers Association said on Wednesday, with the 30-year fixed rate hitting the highest level since December 2000 last week, helping to push mortgage applications to their lowest level in 28 years. .
This came after yields on US government bonds, which affect home loan prices, rose to their highest levels since the 2007-2009 financial crisis.
Amid ultra-low interest rates, the SPAC market exploded in 2021, but it quickly came under scrutiny from the US Securities and Exchange Commission, which was concerned some investors might get a crude deal. Since then, a rate hike by the US Federal Reserve to tame inflation and a crackdown by the Securities and Exchange Commission (SEC) have stymied the SPAC market, recovery rates have soared.
The SEC last year requested information about Garg’s business dealings and allegations made in a lawsuit that he and Better made misleading statements.
The agency told Better and Aurora this month that it had completed its investigation and would not recommend enforcement action, according to a regulatory filing, paving the way for closing the deal.
Better, executives said, is to expect a surge in refinancing demand next year, when the Fed is expected to start cutting interest rates, which in turn will lower Treasury yields and mortgage rates.
“We think this is a really great time for us to be there, with an additional $550 million in capital from SoftBank that will enable the company to continue to innovate and serve its customers,” Garg told Reuters.
(Reporting by Hannah Lang in Washington and Lance Tupper in New York; Reporting by Mohamed for The Arabic Bulletin) Editing by Michelle Price, Jonathan Otis and Margarita Choi
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