Pedestrians walk past SoftBank Group signage outside a store in Tokyo, Japan on November 29, 2018.
Kiyoshi Ota | Bloomberg | Getty Images
Better.com digital mortgage lender announced Tuesday that it is making its market debut through its merger with Aurora Acquisition Corp. valued at $ 7.7 billion.
The company ranked 15th on last year’s CNBC Disruptor 50 list,was last valued at $ 6 billion after an investment by SoftBank in April 2020. At the time, the Wall Street Journal reported that the Japanese tech conglomerate had agreed to transfer all of its voting rights to co-founder and CEO Vishal Garg “as a token of its willingness” to support the company.
The New York City-based company was founded in 2016 by Garg, a former Morgan Stanley analyst, after a contract to sell a house for his family failed. A cash buyer could beat their traditional mortgage lender’s timing, and then Garg thought there had to be a better way. He used the deposit he had set aside to start Better.
Better’s platform is moving the mortgage process entirely online, offering customers the ability to upload and eSign documents. In addition, the closing time is to be reduced from an industry average of 42 days to 21 days. According to Garg, the all-digital approach also helps reduce prejudice against minorities when applying for mortgage loans. The company previously cited a study by the National Bureau of Economic Research that found personal lenders were about 6% more likely to turn down minority applicants than comparable non-minority applicants and minority applicants for their mortgages, too.
“We are excited to partner with Better, an emerging market leader with proven leadership led by Vishal, an attractive business model and a highly scalable digital platform,” said Thor Björgólfsson, Chairman of Aurora, in a press release.
Amid the frantic pandemic-induced refinancing, Better lent nearly $ 25 billion last year and $ 14 billion in the first quarter of 2021 alone, the Journal said. In addition, the company posted not only $ 800 million in sales but also profits last year, although its growth has not been without controversy.
The SPAC deal includes a $ 1.5 billion private investment in public equity (PIPE) led by SoftBank. PIPEs are mechanisms for companies to raise capital from a select group of investors that enable the final market debut.
“Everyone deserves a home, and we won’t stop until we enable everyone to not just dream of a home but to have one,” Garg said in the deal announcement.
Over 300 SPAC transactions were completed in the first quarter of 2021 and the real estate and mortgage markets have been hot, but SPAC yields have declined sharply over the year.
The company’s own CNBC SPAC 50 index, which tracks the 50 largest pre-merger US blank check trades by market capitalization, rose sharply earlier this year but saw a sharp decline and is now negative year over year. The CNBC SPAC Post Deal Index, made up of the largest SPACs to hit the market that announced a target acquisition, has wiped its gains since the start of the year. The CNBC SPAC Post Deal Index was down 6.98% for the past week through Monday.
The transaction is expected to close in the fourth quarter.
STAY TUNED:: The 2021 CNBC disruptor 50 The list will be published online and online on May 25th.