Better Home & Finance Holding Company has adopted a shareholder rights plan, commonly called a “poison pill,” adding a new defensive layer to its escalating fight with founder and former CEO Vishal Garg over control of the mortgage lender.
The limited-duration plan would generally become exercisable if a person or group acquires at least 15% of any class of Better’s common stock or 15% of the voting power of its outstanding shares. If triggered, shareholders other than the person or group crossing the threshold would be entitled to purchase additional Better shares at a substantial discount, potentially diluting the triggering investor’s ownership and voting influence.
The plan took effect immediately and is scheduled to expire at Better’s 2027 annual shareholder meeting unless the board redeems, exchanges, or terminates it earlier. Shareholders of record on Aug. 31 will receive one right for each Better share they hold.
Better said the special committee of its board adopted the plan to protect public shareholders from what it described as Garg’s attempt to gain control without paying a control premium or fully disclosing the investors allegedly working with him.
“Mr. Garg is leveraging the disproportionate voting power of his super-voting shares and seeking to amplify that influence by coordinating with a group of shareholders whose identities, interests and arrangements have not been properly disclosed,” the company said.
Those remain Better’s allegations. No court or regulator has determined that Garg improperly formed an undisclosed shareholder group or violated federal securities laws.
A Defensive Move, Not An End To The Vote
The plan represents Better’s most consequential defensive action since the company removed Garg as CEO and he began seeking shareholder support to replace a majority of its board.
Garg’s group filed a preliminary consent solicitation with the SEC on Aug. 17. It is asking shareholders to remove five of Better’s eight directors.
The filing says the formally disclosed Garg Group beneficially owns 118,260 Class A shares and 1.91 million Class B shares, representing approximately 13.7% of Better’s outstanding voting stock. That ownership includes currently exercisable options for Class B shares.
The 13.7% figure should not be read as placing Garg’s group precisely 1.3 percentage points below the rights plan’s trigger. Better’s plan separately refers to ownership of any common-stock class and total voting power, while each Class B share carries three votes compared with one vote for each Class A share.
The plan does not prevent Garg from soliciting shareholder consents or shareholders from supporting his board-removal campaign. Better said it was not intended to block proxy solicitations, shareholder communications, acquisition offers, or discussions with the board.
Its immediate effect is to restrict the ability of Garg or other aligned investors to increase or coordinate their ownership without risking substantial dilution.
The Board Is Not Taking Any Chances
The defensive measure comes days after Better publicly argued that Garg had failed to assemble the shareholder support needed to remove the directors.
Better initially said Garg lacked sufficient support from public shareholders. Garg subsequently acknowledged that an “administrative error” involving a supporting investor’s filing left him without enough valid consents, but his formal solicitation to remove the directors is moving forward.
On Wednesday, Better sued Garg in federal court, accusing him of making misleading statements, coordinating improperly with other investors, and violating federal securities solicitation rules. The company is seeking an order requiring corrected disclosures and barring Garg from continuing what it describes as an unlawful solicitation.
Garg has maintained that the current board has destroyed shareholder value and departed from the turnaround strategy he led. His proposal includes removing five directors, continuing cost reductions, conducting a search for a long-term CEO, repurchasing as much as $30 million of Better stock, and exploring the sale of the company’s U.K. banking operation.
Better previously said Garg was removed as CEO after the board determined he was unfit to continue leading the company. That account represented a significant shift from Better’s Aug. 3 announcement, which said Garg had “mutually agreed” to step down.
The company appointed Lewis as interim CEO while Garg retained his board seat.
Control Fight Reaches Better’s Capital Structure
The dispute is unfolding while Better continues trying to turn higher mortgage production into sustainable profitability.
Better originated $1.67 billion in loans during the second quarter, up 38% from a year earlier, while revenue increased 28% to $54.7 million. The company still recorded a $30.6 million net loss and a $14 million adjusted EBITDA loss.
Lewis also said Better will miss its previous target of reaching adjusted EBITDA break-even in September. Better expects a third-quarter adjusted EBITDA loss of $15 million to $18 million on funded loan volume of $1.375 billion to $1.525 billion.
The rights plan does not determine who will win the shareholder vote. It does show that the fight has moved beyond competing press releases and courtroom allegations and into Better’s capital structure.
Better says Garg does not have the votes. Its board is now taking steps designed to make sure he cannot strengthen his position by acquiring or coordinating additional ownership while the campaign proceeds.
