Softbank-backed digital mortgage lender Better yesterday announced its intention to enter into a SPAC with The Aurora Acquisition Corp. join to bring Better to the public. The transaction is expected to close in late 2021. This merger gives Better an implied equity value of approximately $ 6.9 billion and an equity value after the monetary amount of approximately $ 7.7 billion, as stated in the announcement.
A subsidiary of SoftBank Group Corp., SB Management Limited, will invest $ 1.5 billion in public equity (PIPE), and Novator Capital, sponsor of Aurora Corp., will invest $ 200 million in the same manner. Activant Capital, an existing investor in Better, will also be participating in the PIPE at an undisclosed price.
Just a month ago, Softbank invested $ 500 million in Better, which resulted in a valuation of $ 6 billion.
Better’s strong financial base is undoubtedly a direct consequence of its success due to the dual impact of the Covid pandemic on persistently low interest rates over the past year and the need for consumers to be able to complete transactions without having to meet in person. In March last year, when the effects of the pandemic began, Better had a 200% increase in uses compared to February and over $ 1 billion total in closed loans over the month, which is more than the four-year-old company that closed for both 2017 and 2018. Throughout 2020, they funded a volume of $ 24.2 billion, according to the press release announcing the SPAC.
Better what was not without some controversy, was founded in 2016 by Vishal Garg who was frustrated with the mortgage application process after losing to a cash buyer on an offer for a home. He built the fully digital platform with multiple products to cut costs and speed up the process for buyers. According to the company’s marketing materials, qualified customers can close in just two weeks thanks to their online process.
The biggest takeaway from this news is how great the demand for real estate transactions in fully digital fashion will be in the future. The pandemic has shown us that the market can persist with limited need for face-to-face contacts and mortgage lenders of all sizes need to upgrade their digital platforms to stay competitive. The news about Better is just the beginning of a much bigger trend.