One week after glibly laying off 900 employees via Zoom and courting a mountain of bad press, Better.com’s founder and CEO Vishal Garg is taking leave “effectively immediately,” according to an internal memo sent to employees of the digital mortgage lender on Friday.
In the interim, Kevin Ryan, chief financial officer at Better and a former executive at Morgan Stanley, will step in to manage day-to-day decisions of the company, the letter read.
Vice’s tech site Motherboard first reported the news on Friday morning.
News of Garg’s departure comes after an onslaught of negative media coverage and a slew of departing executives, a result of Garg laying off 9% of the company’s employees last Tuesday and then criticizing their work ethic in a subsequent communique with remaining employees.
Specifically, Garg accused former employees of “stealing” from the company by working a mere two hours per day.
He apologized to employees this week, noting in an email that he “failed to show the appropriate amount of respect and appreciation for the individuals who were affected.” But the damage was done.
It was hardly Garg’s only transgression as the head of the digital mortgage lender. He previously called workers “dumb dolphins” in an email and had a lengthy history of legal issues in which he was accused of fraud and misleading investors, Forbes previously reported. (A Better.com spokesperson said last year that it was an “unfortunate fact of life” for the CEO of a startup to be embroiled in lawsuits.)
Earlier last week, Better.com received a $750 million cash infusion from its financial backer SoftBank Group out of a total $1.5 billion in committed funding. The remaining $750 million is to be doled out after the company goes public via a special purpose acquisition company.
But when – or if – that will happen has been thrown into question.
The amendment to the financing agreement is likely to push Better’s aspirations of going public in the fourth quarter of 2021 to next year, if it can get off the ground.
The mortgage lender noted in a press release that the new financing agreement does not impact the implied equity value for Better of approximately $6.9 billion, but even that figure has been judged with skepticism by Wall Street analysts and mortgage industry executives.
At the time, Ryan, now the head of Better, issued a statement to HousingWire that “a fortress balance sheet and a reduced and focused workforce together set us up to play offense going into a radically evolving homeownership market.”
Originally, the financing agreement stipulated that Softbank would provide $1.78 billion to the mortgage lender, of which $950 million would be used to purchase shares from existing Better stockholders.
The letter sent to employees on Friday also said that the board has engaged an independent third-party firm to do a leadership and cultural assessment and recommendations will be used to “build a long-term sustainable and positive culture at Better.” All members of Better.com’s diversity, equity and inclusion team were let go in the mass layoff last week, sources said.
“We have much work to do and we hope that everyone can refocus on our customers and support each other to continue to build a great company and a company we can be proud of,” the letter concluded.
Like many mortgage lenders, Better made a killing in 2020 thanks to low rates and a homeowner rush to refinance. Garg has said the company made $250 million in profit in 2020.
But 2021 has not been as kind. The refi wave crested earlier this year and interest rates have climbed well above 3%, turning the mortgage market from refi-heavy to purchase. Better, which grew to about 10,000 employees before the layoffs and does not offer commission to its loan officers, has struggled to capture purchase business. The company lost $86 million in the second quarter, was on pace to lose $100 million in the third quarter, and losses were anticipated to exceed that in the fourth quarter.
Better’s financial backer, SoftBank, has some experience with brash-and-controversial CEOs wearing out their welcome, though they haven’t exactly been quick to act. It took years of accusations of self-dealing and corporate malfeasance for SoftBank to force out WeWork co-founder Adam Neumann. And he received what many described as a “golden parachute” of over $1 billion to give up control of the company. It’s unclear what Garg, who received $25 million in compensation last year, will be paid upon exiting the company.