Mortgage lender Better's shares sink in grim Nasdaq debut (updated)

BOS Better Online Solutions

24/08/2023 15:48

(Adds fresh share price data in paragraph 3; context in
paragraphs 4, 5, 9 and 10)
    By Hannah Lang, Lance Tupper
       Aug 24 (Reuters) - Shares in Better  BETR.O  plummeted
more than 95% on Thursday as investors snubbed the online
mortgage lender, which went public via a blank-check company
merger just as mortgage rates have hit two-decade highs.
       SoftBank-backed Better completed its combination with
special purpose acquisition company (SPAC) Aurora Acquisition
Corp on Thursday, a deal that was first announced in 2021 but
delayed amid regulatory scrutiny and layoffs, regulatory filings
show.
    Aurora went public in March 2021. Shares in Better Home &
Finance Holding Co, the newly merged entity, fell as low as 77
cents in early trading, and were last down 94% at $1 in late
afternoon trading.
    SPACs are shell companies that raise funds through a public
listing with the goal of acquiring a private company and taking
it public. Investors in the SPAC typically have the option to
redeem their shares before the merger.
    In Better's case, 95% of Aurora shareholders redeemed their
shares, leaving the SPAC's trust account with roughly $24
million at the end of June from about $283 million at the end of
last year, filings show. Typically, a small amount of publicly
available shares makes a stock prone to volatility.
    The company did not immediately respond to a request for
comment on the share price move.
The completion of Better's merger with Aurora will provide the
mortgage lender with an infusion of $550 million from SoftBank,
which it will use to expand its mortgage product offerings, CEO
Vishal Garg told Reuters in an interview earlier this week.
Better is going public as U.S. mortgage rates continue to surge,
with the popular 30-year fixed rate last week hitting the
highest level since December 2000, helping drive mortgage
applications to a 28-year low, the Mortgage Bankers Association
said on Wednesday.
    That came after yields on U.S. government bonds that
influence home-loan rates surged to the highest since the
2007-2009 financial crisis.
    Better enjoyed huge growth during the onset of the COVID-19
pandemic when mortgage rates cratered, notching more than $850
million in revenue in 2020, filings show. But it has struggled
as rates have risen, reporting a net first quarter loss of $89.9
million in July.
    The company, however, expects a boom in demand for
refinancings next year, when the U.S. Federal Reserve is
expected to start cutting interest rates, which in turn would
cause Treasury bond yields and mortgage rates to fall.
    "We think that this is a really great time for us to be out
there, capitalized with an additional $550 million from SoftBank
that will enable the company to continue to innovate and serve
its customers," CEO Garg told Reuters.
Amid ultra-low interest rates, the SPAC market exploded in 2021,
but quickly drew scrutiny from the U.S. Securities and Exchange
Commission, concerned some investors were getting a raw deal.
Since then, U.S. Federal Reserve interest rate hikes aimed at
taming inflation and an SEC crackdown have put a damper on the
SPAC market, and redemption rates have risen.

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US 30-year mortgage rate soars to highest since 2000    https://www.reuters.com/markets/us/us-30-year-mortgage-rate-soars-highest-since-2000-2023-08-23/
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(Reporting by Hannah Lang in Washington and Lance Tupper in New
York; Editing by Michelle Price, Mark Porter and Jonathan Oatis)
((mailto:Hannah.Lang@thomsonreuters.com;))