The recent public market debut of Better.com was a major disappointment and setback for the upstart mortgage company. After weeks of bullish anticipation of an offering that was set to re-define the real estate financing industry, Better.com’s stock failed to garner much interest on Wall Street and fell flat on its very first day of trading. It seemed that, despite all the hype, investors turned a cold shoulder towards the company’s ambitious move to become a publicly traded entity.
The first red flag for potential investors was the extremely low pricing of the stock. Even before shares began trading, Better.com had already priced its initial offering at $15, far below the expected range of $19 to $22. Consequently, the offering was significantly scaled back and the company raised only $317 million, compared to initial plans for an offering between $500 million and $750 million.
At the end of its first day of trading, Better.com’s stock had dropped 21%, closing at $11.84. To make matters worse, it continued to decline in the following weeks, dropping as low as $6.50 on April 14th. The declines came at a time when traditionally safe investments such as US Treasury bonds and gold rallied, as investors moved away from riskier stocks.
While the markets had previously favored tech stocks and IPOs, the dismal performance of Better.com’s offering has left investors and analysts asking some tough questions about the company. For one, many wonder if the company’s business model – which often entails providing mortgages with attractive, but risky, rates – is sustainable in the long run. It has also caused many to suggest that the company’s offering had been overhyped and that the company’s success was premature.
The fate of Better.com’s public market debut will surely be a cautionary tale for other companies hoping to go public. Undoubtedly, it will be a long road ahead for the company as it seeks to regain the momentum that once had investors so excited for its offering.
