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Jan 26, 2022 - Economy & Business

The bad behind Better.com's SPAC deal

Dan Primack
A gavel

Illustration: Sarah Grillo/Axios

Vishal Garg will be CEO of home mortgage lender Better.com if and when it goes public via SPAC, despite having laid off around 900 employees via Zoom and then trashing many of them via an "anonymous" social media account. But Garg's level of control remains in flux, due to a side letter agreement with SoftBank.

Why it matters: SPAC mergers with a lot less hair on them have been canceled for a lot less.

Background: SoftBank bought into Better in early 2020 by purchasing around $500 million worth of shares from existing investor Goldman Sachs at a $6 billion valuation. It also agreed to make a capital contribution tied to its return following Better's public listing, and originally said it would contribute $1.3 billion via a PIPE in the SPAC merger.

  • SoftBank did all of this before Vishal Garg revealed his lack of empathy for ex-employees, but after he'd gotten into several legal spats.
  • Some were brought by deep pockets like Goldman and PIMCO, involving entities controlled by Garg. Another now-settled case was brought by Better investor Pine Brook (which was called "sewage" by Garg in an email).
  • Some come from Garg's former pal and business partner Raza Khan, of whom Garg once threatened in a deposition to "staple him against a fucking wall and burn him alive."

The side letter: SoftBank, in its apparent zeal to invest, promised to give Garg the 1.9% voting rights tied to its original investment, "contingent on the final settlement of certain legal proceedings (which has not yet occurred)."

  • This voting proxy agreement, whereby Garg gets more power if he can make the remaining lawsuits go away, remains in effect even after the SPAC deal closes.
  • A SoftBank spokesman declined to comment on the agreement.

Fast forward: Better delayed its merger closing shortly after the layoffs, after it and SoftBank restructured the PIPE and Garg took a one-month leave of absence (he returned last week). The Telegraph last month reported that the merger could be completed "any day now."

The bottom line: This deal is set to create a public company CEO who could be rewarded for settling acrimonious litigation, just weeks after he was sidelined for other bad behavior.

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