With mortgage rates rising to their highest levels in more than two decades, it might not be the best time for Better Home & Finance, a mortgage origination company, to go public via a deal with a special purpose acquisition company, or SPAC.Better completed a merger with Aurora Acquisition Corp. , a SPAC, on Tuesday. Shares and warrants of the combined company will begin trading on Thursday, under the tickers “BETR” and “BETRW,” respectively.
At Aurora’s closing price of $17.45 on Wednesday, investors are valuing Better at a sky-high $14 billion based on the post-merger fully diluted share count in the SPAC’s latest securities filing. That’s for a company that had only $383 million in revenue last year and lost $889 million. Aurora and Better declined to comment on Better’s valuation.
But 2022’s rapid rise in rates caused mortgage loan whiplash. Mortgage origination dollar volume sunk to $2.3 trillion in 2022, according to the Mortgage Bankers Association, almost half of the $4.4 trillion originated in 2021. The average 30-year fixed-rate mortgage ended 2022 at 6.4%, according to Freddie Mac, more than double the average rate at the end of 2021.
A SoftBank affiliate agreed to put up $750 million in the form of a convertible note in late 2021 that can be swapped for Better stock at a discount once the company is publicly traded. SoftBank had earlier invested $500 million in Better’s Series E funding round, which valued the company at $6 billion in early 2021.
The SPAC is still the vehicle taking Better public, but it’s not the source of financing it once was. The money raised in the deal will come in the form of a second convertible note from a SoftBank affiliate.
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