Stocks in the mortgage fintech space do better when they first hit the market

A worried stock market trader looks at the big board.

Better’s stock market debut proved to be a bloodbath for investors in Vishal Garg’s fintech company. JOHANNES EISEL – AFP/Getty Images

There is only one word in the English language that comes close to capturing the essence of fintech’s first day trading in the stock market – bloodbath.

When Thursday finally came to a close, 93% of the investor’s capital tied to the online mortgage lender had evaporated in a single trading session.

Founder Vishal Garg, who worked “really hard” to reform himself and become a better CEO after firing hundreds of employees en masse over a Zoom call, probably didn’t expect to enjoy the same fairytale that VinFast Auto did. Month.

But judging by his words earlier that day, he certainly didn’t imagine that the shares in his company would automatically burn either.

“It’s party time.” I have tooted, after successfully completing the merger with the publicly traded empty vessel Aurora Acquisition Corp. “We are proud to have taken a major step in expanding our ability to innovate the homeownership process by becoming a publicly listed company.”

Hours later, after the share price skyrocketed, a defeated-looking finance chief took to Yahoo Finance Live to explain the disastrous plunge. He said that from the company’s perspective, the reverse merger with Aurora SPAC — a deal that took more than two years in the making — was, in fact, a life saver.

because restricted in its evaluation With investors in 2021, during the height of the speculative bull market, the merger means it can now tap into the $568 million in cash needed to survive an environment in which the cost of a 30-year fixed-rate mortgage has risen to a 23-year high. .

“There are 4,000 mortgage lenders in the US. If interest rates stay high for much longer… I think a lot of these companies will suffer, and a lot of them may cease to exist,” said Kevin Ryan, Better’s chief financial officer. in an interview With online publishing. “We just strengthened our balance sheet at a time when no one really thought anyone in this sector could do that.”

Moreover, no one was treated unfairly, everyone was eliminated equally in Thursday’s incident. This is because, according to Ryan, no early investors (including financial backer SoftBank) used the high 2021 valuation of the SPAC deal as an exit liquidity to withdraw funds.

He promised that all money raised would go directly to helping the company rather than lining anyone’s pockets.

‘This is only the beginning’

However, the 93% drop on its debut is a far cry from the remarkable success of VinFast Auto, which has also eschewed the usual rigor of a traditional IPO in favor of an easier path to market via SPAC.

The Vietnamese startup that sold a total of 18,700 electric cars during its six-year existence, some of which were so poorly built that they are now Compensate angry customers– Cleverly designed August insert to ensure virtually no free float.

This disrupts the traditional role of the marketplace as a price discovery tool, enabling VinFast to achieve a $120 billion market value This ranks it as the third largest automaker in the world behind only Tesla and Toyota.

In the process, founder and chairman Pham Nhat Phong’s net worth skyrocketed overnight. according to forbes, He is now twenty-eighth The richest person on earth, behind Nvidia CEO Jensen Huang.

Any hopes Better’s Vishal Garg may have upon joining the post List of famous billionaires They are probably dead and buried now.

Just to get back to the $10 price the stock started at Thursday, it would need a 769% upside from its current level. this means Pre-market recovery on Friday 14% as of press time would only take it back to $1.31 – in other words, what traders call the “dead cat bounce”.

And for investors with little left on the dollar, Better’s Ryan had these reassuring words to offer.

“We’re building long-term shareholder value,” said the CFO. “This is only the beginning.”

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