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SEC probing Better as SPAC deadline looms

Barclays, Citigroup exited as deal advisers

Better CEO Vishal Garg (Getty, Scott Rosenthal, CC BY-SA 4.0 - via Wikimedia Commons)
Better CEO Vishal Garg (Getty, Scott Rosenthal, CC BY-SA 4.0 - via Wikimedia Commons)

UPDATED, July 15, 2022, 3:30 p.m.: Things keep getting worse for Better.

The U.S. Securities and Exchange Commission is probing the digital mortgage lender, according to a regulatory filing reported by Inman. Better and Aurora Acquisition Corp., the SPAC formed to take Better public, are cooperating with the voluntary request for documentation.

The examination came out of a lawsuit filed by Sarah Pierce, the former executive vice president for sales and operations. Pierce accused the digital mortgage lender of misleading investors, claiming CEO Vishal Garg told investors the company would be profitable sooner than internal projections showed and falsehoods about the volume of direct-to-consumer loans that came from internet traffic not generated by paid marketing efforts.

Pierce claimed in the suit she was forced out at the beginning of the year after raising concerns.

The SPAC deal was agreed to in May 2021, but hasn’t closed yet. The companies are facing a Sep. 30 deadline to complete the merger.

That became more complicated after two of the deal advisers resigned from their roles. Better and Aurora said Barclays resigned on June 22, and Citigroup resigned the following day. Bank of America, which was acting in an unofficial capacity, is also no longer involved.

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Better and Aurora said the resignations shouldn’t delay the public process and they’re moving full steam ahead on the merger. They acknowledged, however, that the deal is looking more fraught than ever, saying they’ve had “preliminary conversations about potential structures where the business combination would be terminated and Better would remain a private company.”

Better is having a very bad year. The company in April cut a “substantial” amount of employees, its second round of layoffs in as many months. In March, the online mortgage startup laid off 3,000 workers in the United States and India, a process reportedly marred by some learning of their job loss after severance payments rolled out prematurely.

In December, Garg took a leave of absence after firing more than 900 workers via Zoom and accusing some in an anonymous online post of being unproductive and stealing from the company. That led to an internal review and the resignations of several executives.

This story has been updated with additional information from Better, which clarified the SEC’s probe was a request for information, not an investigation as an earlier version of this story previously stated. 

— Holden Walter-Warner

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MortgagesProptechSPACStartupsTechnology