Just when things seemingly couldn’t get worse for Better.com, they just did.
Former executive vice president for sales and operations Sarah Pierce accused the company of misleading investors in financial filings and other statements, the Wall Street Journal reported. In a lawsuit filed Tuesday, Pierce claimed she was forced out of the digital mortgage lender earlier this year after raising concerns.
The alleged misrepresentations came as Better.com was pursuing a SPAC merger in an effort to take the company public. The deal was agreed to in May 2021, but has yet to close.
Considering the numerous issues at the startup and the cooling SPAC market, it’s not clear if the merger will ever close.
Pierce’s accusations include a claim CEO Vishal Garg told the company board and investors that the company would be profitable at the end of the first quarter, despite losing $304 million last year. Pierce said internal projections didn’t have the company breaking even until the second half of the year.
For the SPAC prospectus, Better.com said it believed 30 percent of its direct-to-consumer loans came from internet traffic not generated by paid marketing efforts. Pierce alleged internal data put that number no higher than 12 percent.
She also said Garg made outlandish comments, claiming interest rates would stay low because President Joe Biden would die from Covid-19.
The former executive also filed a complaint with the Occupational Safety and Health Administration, alleging she was retaliated against for raising concerns.
“We have reviewed the claims in the complaint and strongly believe them to be without merit,” Better.com said in a statement to the Journal.
It’s been a challenging few months for the online mortgage startup. In April, the company made a “substantial cut” to its workforce, the second round of layoffs in as many months. In March, the New York-based company laid off 3,000 workers in the United States and India, a decision marred by some reportedly learning of the cuts after severance payments were rolled out prematurely.
And in December, Garg took a leave of absence after firing more than 900 employees via Zoom and accusing some in an anonymous online blog post of being unproductive and stealing from the company. The handling of those layoffs triggered an internal review and led to the resignations of several executives, including Pierce, who was reportedly bothered by the disparagement of the ex-employees.
Meanwhile, mortgage rates continue to climb and demand for mortgages from homeowners continues to fall, putting companies in the mortgage industry on uneven footing.
[WSJ] — Holden Walter-Warner