Indian American’s Mortgage Lender Startup Sees Significant Stock Crash Minutes After Making Public Debut
- Better.com CEO Vishal Garg was in the spotlight last year after firing over 900 people on a Zoom call just before the Christmas holidays.
Vishal Garg, the Indian American founder and CEO of mortgage lender better.com who garnered international attention after firing over 900 people on a Zoom call just before the Christmas holidays last year, is back in the news. Just hours after making its public debut on Aug. 25, the startup experienced a major drop in its share prices. “Shares plunged immediately at the opening bell, falling so quickly that trading was halted four times in the first 30 minutes,” the Daily Mail reported. By the next day, the value of shares had plummeted by over 95 percent.
The company went public a few days after it merged with Aurora Acquisition Corp. The combined entity is now known as Better Home & Finance Holding Company. According to Business Wire, “this deal brings in approximately $565 million in fresh capital for Better.com, including a $528 million convertible note from SoftBank affiliates and additional equity from NaMa Capital, an investment firm associated with Aurora.”
In the run up to the merger, Garg told TechCrunch that has been “working really hard” to be “more empathetic”and “treat people with kindness.” Speaking to the online newspaper focusing on high tech and startup companies, he said he was “very mission-centric, customer centric, and really, really focused on what it took to drive growth.”
Garg grabbed headlines late last year, after a video, which went viral, showed the Indian American telling his employees right at the onset that he comes to them with “not great news.” He continued: “If you’re on this call, you are part of the unlucky group being laid off,” adding that their “employment here is terminated effective immediately.
He said changes in the market, “efficiency” and “productivity” were the reasons behind the mass termination. “The market has changed … we have to move with it in order to survive,” he said in the mass Zoom call. He told the employees that letting them go was “ultimately” his decision and he wanted them to hear it from him. Confessing that he didn’t want to do this, Garg said during the call that the last time he fired employees he cried. “This time I hope to be stronger.”
Almost a week later, after facing severe backlash, Garg apologized “for the way he handled the layoffs.” In a letter he sent to his employees, posted on the company’s website, he wrote: “I own the decision to do the layoffs, but in communicating it I blundered the execution. In doing so, I embarrassed you.” Adding that the way he “communicated this news made a difficult situation worse,” he said he is “committed to learning from this situation and doing more to be the leader that you expect me to be.”
Garg found the company in 2016. It is backed by Japanese conglomerate Softbank, among others, and “received a $750 million cash infusion from investors last week and was recently valued at around $7 billion,” according to a Forbes report.
Garg has reportedly personally guaranteed any losses SoftBank might incur if it opts to sell the debt. The terms of the agreement could potentially force Garg to sell his Better shares and potentially impacting the stock price, according to TechCrunch. However, Daily Mail noted that “despite the infusion of capital, Better.com faces ongoing financial challenges.”
The company reported a net loss of” $89.9 million in the first quarter,” Daily Mail reported. It also cut “approximately 91 percent of its employees over an 18-month span,” the report added. Although it “managed to decrease its loss compared to the $327.7 million net loss at the start of 2022, it remains in a struggle due to high mortgage interest rates and a slowdown in the national housing market,” the report said.
According to TechCrunch “the transition from a private entity to a public one is particularly tricky due to Better.com’s involving mishandled layoffs, allegations of mistreatment towards employees, acknowledged financial missteps, notable executive departures, and other claims.” But it adds that “from the company’s standpoint, the reverse merger with Aurora SPAC was, in fact, a life-saving move.”