9/7/2023: What Happened to Better.com

A disastrous IPO

Better.com, an online mortgage lender that IPOed through SPAC two weeks ago, has seen its stock tanked more than 90% since the IPO, closing at $0.629 today. Better.com was a Unicorn and in 2020 raised a big private round from Goldman Sachs and some other high profile investors at a $4B valuation. Through the SPAC IPO, Better.com got another $500M-$750M of fresh capital but after the crash, its current market cap is around $500M. My back of envelope math indicates that pre-IPO investors are losing 90+% of their investment. I actually had an opportunity to participate in a secondary sale of Better.com stocks back in 2020. I decided to pass as I didn’t see a lot of upside from the rich $4B valuation but I didn’t expect the company’s valuation to crash so hard.

The company’s trouble started in late 2021 when 900 Better.com employees were laid off through Zoom. Let me remind you in late 2021, the interest rate was zero and a lot of people were refinancing their mortgages at historically low rates. Basically, that was the boom time of mortgages but somehow they had to lay off employees to get its business in shape. Fast forward to 2023, the demand for mortgage refinance dried up due to high interest rates and the company’s headcount shrank from 10,000 people before the first round of layoff to 1300 today. Better.com’s revenue went from $1.217B in 2021 to $361M in 2022 and the company is losing a crazy amount of money. It was a disaster. But somehow they were able to IPO and get $500M+ of fresh capital to keep going. Anyway, investors who got involved in its IPO must be hurting but the company might be able to survive with a much smaller team and fresh capital if they can withstand the mortgage winter. I doubt there will be many more SPAC IPOs in the near future after this. But hopefully, the upcoming IPOs like ARM or Instacart will do a lot better than Better.com.