$ 7.7 billion SoftBank-backed Best in PSPC mortgage lender

Pedestrians walk past SoftBank Group signage outside a store in Tokyo, Japan, November 29, 2018.

Kiyoshi Ota | Bloomberg | Getty Images

Digital mortgage lender Better.com announced on Tuesday that it would make its market debut by merging with Aurora Acquisition Corp., valuing Better at $ 7.7 billion.

The company, ranked No. 15 on last year’s CNBC Disruptor 50 list, was recently valued at $ 6 billion following an investment from SoftBank in April 2021. At the time, the Wall Street Journal reported that the Japanese tech conglomerate agreed to cede all of its voting rights to the co-founder and CEO Vishal Garg “as a sign of his eagerness” to support the company.

The New York-based company was started in 2016 by Garg, a former Morgan Stanley analyst, after a failed deal to buy a house for his family. A cash buyer was able to beat his traditional mortgage lender’s schedule, and that’s when 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, giving clients the ability to electronically upload and sign documents, and claims to reduce the closing time from an industry average of 42 days to 21 days. Garg says the digital-only approach also helps reduce bias against minorities when applying for mortgages. The company previously cited a National Bureau of Economic Research study showing that face-to-face lenders reject minority applicants about 6% more often than comparable non-minority applicants, and also charge minority applicants more for their mortgages. .

“We are delighted to partner with Better, an emerging market leader with a proven executive leadership led by Vishal, an attractive business model and a highly scalable digital platform,” said Aurora President Thor Björgólfsson in A press release.

Amid a pandemic-induced refinancing spree, Better granted nearly $ 25 billion in loans last year and $ 14 billion in the first quarter of 2021 alone, according to the Journal. Additionally, the company not only generated $ 800 million in revenue last year, but also in profit, although its growth has not gone without some controversy.

The PSPC deal includes a $ 1.5 billion private investment in a private equity arrangement (PIPE) led by SoftBank. PIPEs are mechanisms for companies to raise capital from a selected group of investors that make entry into the end market possible.

“Everyone deserves a home, and we’re not going to stop until we allow everyone to not only dream of a home, but have one,” Garg said in the report. announcement of the agreement.

Over 300 PSPC transactions took place in the first quarter of 2021, and the housing and mortgage market was hot, but PSPC yields declined sharply during the year.

The proprietary CNBC SPAC 50 index, which tracks the 50 largest US-based pre-merger blank check transactions by market cap, soared earlier this year but suffered a steep decline and is now negative over the year. The CNBC SPAC Post Deal Index, which includes the largest SPACs that have entered the market and announced a target acquisition, has seen its cumulative gains since the start of the year wiped out. The CNBC SPAC Post Deal index fell 6.98% in the past week through Monday.

The transaction is expected to close in the fourth quarter.

STAY TUNED: The 2021 CNBC 50 disruptor The list will be released on air and online on May 25.

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