Markets

published : 2023-08-26

From a Turbulent IPO to a Sudden Rebound: The Up-and-Down Journey of Better.com

As Mortgage Rates Peak at 7.23% - the Highest Since 2001, Better.com Works towards Recovery

A view of the Better.com office, bustling with activity. Vishal Garg, CEO, is in a corner office, deep in conversation over a Zoom call. His desk is cluttered with papers, and the backdrop shows a digital display of their stock prices. Image taken with Canon EOS 5D Mark IV.

Better.com, a renowned online mortgage lender backed by SoftBank, experienced a troubling debut, its shares dramatically plunging by 93%. However, the company navigated through the storm, witnessing a rebound in its shares, aligning with the current environment of high mortgage and interest rates.

Vishal Garg, the CEO of Better, confidently attributes the present stock price to the prevailing market conditions.

Memories of December 2021 resurface as the company, caught in controversy, had laid off 900 employees entirely over a zoom call. The repercussions were severe, with profits tumbling due to skyrocketing mortgage rates, consequently reducing the demand for home loans.

A montage photo of a typical American home and a graph demonstrating the rising mortgage rates. It illustrates the connection between the housing market and the challenges faced by lenders. Image taken with Nikon D850.

Despite these challenges, Better's leadership remains optimistic. When the deal was first structured in 2021, interest rates were at a historical low. As Garg says, their state-of-the-art technology, combined with a solid capital base of $560M, equip them to weather fluctuations and create significant value for shareholders.

In 2021, Better had merged with special-purpose acquisition company (SPAC) Aurora Acquisition, a move that had been delayed due to regulatory scrutiny and internal layoffs.

The merger's silver lining is a massive $550 million capital injection from SoftBank, which Better aims to utilize to broaden its mortgage product suite.

A close-up shot of Vishal Garg looking determined, the colorful cityscape reflecting in his office window. This shot symbolizes a hopeful future despite a tough market environment. Image taken with Sony Alpha a7 III.

However, the road ahead is steep. The first-quarter reports showed a net loss of $89.9 million, indicative of the challenging business landscape. Mortgage rates in the U.S are relentlessly increasing, with the popular 30-year fixed rate soaring to an all-time high of 7.23%, a level not seen since 2001.

Despite this, analysis by Redfin reveals that home prices have been on an upward trend, not seeming to deter by the swelling mortgage rates.

As per Redfin's report, the average U.S. home price stood at $382,000 during the four weeks ending July 23, reflected a modest annual increment of 2.6%, the highest since the previous November.