In the tumultuous realm of IPOs and SPACs, one company’s entrance into the market has grabbed headlines like no other. Online mortgage lender Better.com (BETR) faced a rocky reception this week that left investors stunned.The merger between Better.com’s parent company, Better Home & Finance, and Special Purpose Acquisition Company, Aurora Acquisition Corp, led to a shocking downfall of over 90% in shares just days after its public debut.
Before the merger, Aurora’s stock price rested at a comfortable $17.44 on August 23. However, fortune took an abrupt turn. By the end of Thursday’s trading session, that figure had plummeted to a mere $1.15. Despite a slight recovery on Friday, closing at $1.19, the sudden and drastic decline remains the focal point.
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The journey to becoming a publicly traded company for Better.com has been a journey fraught with challenges and transformations.The initial public offering (IPO) faced a significant setback last year due to an investigation by the Securities and Exchange Commission (SEC) probing potential securities law violations by the company. Only in early August did the SEC announce it would not take enforcement action against Better.com.
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In 2021, the company made headlines with a rather unconventional move: the abrupt termination of 900 employees via a Zoom call. CEO Vishal Garg acknowledged this misstep and shared his commitment to rebuilding trust within the team through extensive leadership training.Looking back on the timeline, Better.com’s Chief Financial Officer, Kevin Ryan, disclosed that the deal for its public status was struck in May 2021.
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Back then, the mortgage market and the environment for Special Purpose Acquisition Companies (SPACs) were much more favorable, contributing to the decision.Among the myriad struggles encountered by companies opting for the SPAC route, Better.com’s predicament stands out for its unique blend of challenges.
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It must navigate not only a less-than-ideal market for recent listings but also one of the most challenging mortgage landscapes in a generation.As of Thursday, the average 30-year mortgage rate saw a significant surge, hitting a 22-year peak at a staggering 7.23%. Moreover, Federal Reserve Chair Jerome Powell’s Friday statement indicated the central bank’s readiness to further raise interest rates to rein in inflation and align it with the Federal Reserve’s 2% target.
While Better.com’s eye-catching 90% stock value drop has certainly captured the market’s attention, it’s crucial to recognize that this isn’t an isolated event. Several other companies that took the SPAC route have also experienced similar or even more substantial plunges in their stock prices.Companies like WeWork (WE), electric vehicle manufacturer Arrival (ARVL), and space tourism venture Virgin Galactic (SPCE) all witnessed their shares tumble by over 85% since their respective public debuts. Notably, both WeWork and Arrival are reportedly exploring the option of filing for bankruptcy, underscoring the immense challenges they presently confront.