- Better Home & Finance Holding Co. (Nasdaq: BETR) ousted founder & CEO Vishal Garg in early August coup led by interim replacement, Orange Capital Managing Partner Daniel Lewis
- Better Home implemented poison pill on Aug. 20, potentially preventing Mr. Garg from naming his own specific slate of directors
- Garg instead proceeded with a consent solicitation asking shareholders to replace five directors, including Mr. Lewis
- Even before naming board nominees, Mr. Garg’s consent solicitation had over 45% of shareholder support, just shy of 50% threshold to win, according to person familiar with the matter
- Such a level of support should prompt company to negotiate, according to governance expert Charles Elson, who says poison pill appears to be “an entrenchment device”
- Some investors also voted with their feet: shares down 55% since Mr. Garg’s ouster
- In surprise announcement. Mr. Garg named three highly-qualified potential director candidates Thursday, including Silicon Valley heavyweight and Amazon director William “Bing” Gordon
- Garg’s slate also includes David Heidecorn, Senior Advisor and former Partner at L Catterton, Steve Sarracino, Founder and Partner, Activant Capital
Better Home & Finance Holding Co. (Nasdaq: BETR), along with other home-equity finance platforms, has faced an uphill battle amid rising mortgage rates. That is no excuse for the board’s latest corporate governance stumble.
Better Home has been a pioneer in the use of AI to gauge credit risk and connect borrowers with lenders more efficiently. But as the company recently faced industrywide headwinds, one investor and director, Orange Capital Managing Partner Daniel Lewis, grew impatient and ousted founder Vishal Garg from his CEO seat in early August. Mr. Lewis is now interim CEO and the company says it’s seeking a full-time replacement.
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The sudden exit led to a high-stakes standoff between Mr. Lewis and Mr. Garg, which has become more complex than a typical proxy fight. On Aug. 20, the company implemented a poison pill provision, which effectively prevents Mr. Garg from working with other shareholders in a group that holds more than 15% of the outstanding stock.
As a result, Mr. Garg has taken the matter to shareholders with a so-called consent solicitation that runs through Oct. 2. The vote is essentially a referendum on five directors, including Mr. Lewis, who would be removed from the board with a vote above 50% of shares outstanding.
Many shareholders have already sided with Mr. Garg, even before knowing who he might invite to join the board. More than 45% of shareholders have cast votes in support of the consent solicitation, according to a person familiar with the matter.
“It’s a nuclear standoff,” Charles Elson, Founding Director, Weinberg Center for Corporate Governance at the University of Delaware told CorpGov in a phone interview. “With over 45% it looks like the founder has a very good shot, which is why the company would be compelled to negotiate.”
Professor Elson also said the poison pill, while not always a sign of weak governance, is fairly easy to criticize in this case. It looks “more like an entrenchment device than something designed to protect shareholder value,” he said.
There are other signs of discontent among stakeholders. In early September, Chad Smith, President, Better Mortgage Corporation and Barry Feierstein, Chief Operating Officer, departed the company. Leah Price, who led the Tinman AI platform, also departed. Two of those former execs, Ms. Price and Mr. Smith, are voting in favor of the consent solicitation, according to people familiar with the matter.
And, of course, plenty of shareholders also appear to have walked away entirely: The stock is down 55% since Mr. Garg was pushed aside.
Mr. Garg declined to comment to CorpGov. A spokesperson for Better Home also declined to comment.
The plot thickened Thursday, when Mr. Garg proceeded to name three potential independent director candidates who will likely command serious attention from shareholders. One is William “Bing” Gordon, a highly-respected Silicon Valley leader who served as senior product advisor to Jeff Bezos and was on the Amazon (Nasdaq: AMZN) board from 2003 to January 2018. He’s a current director on the boards of Duolingo (Nasdaq: DUOL) and Take-Two Interactive (Nasdaq: TTWO), while also a longtime Partner and Chief Product Officer at Kleiner Perkins, the first venture-capital firm on Menlo Park’s Sand Hill Road, founded in 1972.
Also on the potential slate is David Heidecorn, Senior Advisor and former Partner at L Catterton, a $40 billion consumer-focused investment house, where he was employed for over 20 years. He is also former EVP and CFO of Alarmguard Holdings, Inc. The third is Steve Sarracino, Founder and Partner of Activant Capital, a growth-investment firm focused on technology-enabled businesses with approximately $1.5 billion in AUM and a large investor in Better Home.
Importantly, Mr. Garg, who has been in the tech-enabled loan industry since the 1990s and more recently harnessed OpenAI LLMs for underwriting and an agentic loan officer, does not plan to seek a return to the CEO seat. Instead, he’d take a “focused innovation role” and hire Daversa Partners, a prominent executive search firm, to find a permanent CEO with fintech, credit and AI experience, aiming to choose a new leader in 120 days.
By contrast, Mr. Lewis, while no doubt successful in his career, has mainly been in an investor rather than operating role over the years. While he was CEO of a fundraising platform, his operating experience doesn’t include much in the relevant field of home equity finance.
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Before news of the three candidates broke, three proxy advisory firms who give shareholders voting recommendations issued opinions on the consent solicitation. While two of them, Institutional Shareholder Services and Glass Lewis, sided with the company, they both highlighted the fact that Mr. Garg had not named his own slate of directors. That makes it hard to know how their recommendations would look in light of the three potential nominees announced Friday.
Another proxy advisor, Egan-Jones, sided with Mr. Garg even without knowing the identity of any potential directors. Egan-Jones cited key metrics in its rationale that are hard to argue. Better Home’s total shareholder return (TSR), which includes distributions like dividends, is the best in a set of comparable companies identified by Egan-Jones, with a rise of 14%, over two years. The other members of the peer set all posted negative TSR.
Source: Egan-Jones
“This outperformance supports the view that Better’s strategy, including Tinman AI, cost discipline, and broader mortgage and HELOC capabilities, was gaining real traction under Mr. Garg’s leadership, not merely stabilizing,” Egan-Jones wrote in its analysis. “We believe a reconstituted Board is necessary to establish clear operating and governance priorities, including the appointment of qualified independent directors, a defined role for Garg, an independent CEO-search process, measurable profitability and liquidity objectives, continued cost discipline, and transparent oversight of Tinman AI, potential asset monetization, and capital-allocation initiatives.”
With shareholders already showing strong support for change, a bombed-out stock and now a strong trio of director candidates, Better Home is primed to get the help it deserves. If the company won’t come to the negotiating table, shareholders look increasingly likely to take matters into their own hands.
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