Better Home & Finance Holding Company said Friday that it terminated founder Vishal Garg as CEO and accused him of delaying the company’s quarterly filing, sharply escalating a dispute over control of the mortgage lender one day after Garg demanded that five directors resign and claimed majority shareholder support for the proposed board overhaul.
The statement contradicts Better’s Aug. 3 announcement that Garg had “mutually agreed” with the board to transition out of the CEO role. Better now says every director other than Garg unanimously voted to terminate him after developing concerns about his “judgment, temperament and credibility.”
The board also accused Garg of refusing to follow the company’s established shareholder-governance process and said it would not voluntarily return control to him.
The company advised shareholders that they do not need to act at this time.
Garg remains a Better director.
Better did not explain why its original announcement characterized his departure as mutually agreed. NMP has requested comment from Garg’s representative regarding the board’s new account and allegations.
Board Rejects Garg’s Demands
Garg launched the board challenge Thursday through a press release and a letter from his attorney. He claims to hold signed declarations from shareholders representing a majority of Better’s voting power and demanded that five directors resign.
Garg asked every director other than himself, and two others, to step down.
Garg’s proposal called for him to return temporarily to an operating role, work for $1 until Better becomes profitable, and purchase $30 million of Better stock. He also proposed forming a new board and special committee to conduct an independent search for a permanent CEO.
After a successor was appointed, Garg said he would transition to chairman or chief product and innovation officer.
Better said Friday that Garg was attempting to regain control without following the procedures established in the company’s governing documents.
The company said its foundational documents provide a process through which shareholders can influence the board’s composition and, indirectly, Better’s leadership. It said those procedures contain formalities and requirements intended to protect all shareholders.
Better did not directly dispute Garg’s assertion that shareholders representing a majority of the voting power support his proposal. It instead objected to his demand that the directors resign voluntarily and said he was refusing to follow the prescribed process.
Better’s governing documents appear to provide a potential path for holders of at least 50% of the applicable voting power to request a special shareholder meeting. The legal sufficiency of Garg’s declarations and the procedures required to remove sitting directors have not been publicly established.
‘Mutually Agreed’ Or Terminated?
Better’s new account differs materially from what the company and Garg said when the leadership transition was announced.
On Aug. 3, Better said Garg had “mutually agreed with the Board to transition from his role as Chief Executive Officer.” The company said Garg would remain a director, assist interim CEO Daniel Lewis with the transition, and continue contributing to Better’s long-term success.
Garg was quoted in the announcement calling it “the right time for new leadership.”
Better also told NMP that Garg would not retain a day-to-day operating role.
Better now says the board, excluding Garg, voted unanimously to terminate him following a series of decisions and actions that raised concerns about his fitness to remain an executive.
The board cited more than $1.5 billion in cumulative GAAP net losses since 2022 and a stock-price decline exceeding 90% during Garg’s leadership. Those figures were presented by Better as part of its case against Garg.
Better also said Garg had told the board that the company would have been better off if the capital raised under his leadership had been placed in U.S. Treasury securities instead of being deployed under his management.
Better Blames Garg For Delayed Filing
Better also blamed Garg for the delay in filing its second-quarter Form 10-Q.
The company said Garg refused to execute mandatory representation letters required to complete the filing and called that refusal the sole cause of the delay. Better further alleged that Garg appeared to be withholding his signature to obtain concessions from the company and its directors.
That account was not included in Better’s original notice to the Securities and Exchange Commission.
In its Form 12b-25 late-filing notice, Better said only that it required additional time to complete its quarter-end closing procedures. The filing did not name Garg or cite missing representation letters.
Better subsequently filed its second-quarter 10-Q. Interim CEO Daniel Lewis signed the certification as the company’s principal executive officer.
Better Raises Possible Securities-Law Concerns
Better also said its board reviewed communications that, according to an analysis by its counsel, may show Garg’s direct involvement in conduct that could violate federal securities laws.
The company did not identify the communications, describe the alleged conduct, cite a specific securities law, or disclose an investigation or enforcement action by a government regulator.
Better said the board would not bypass federal disclosure requirements or its established governance procedures in response to Garg’s demands.
Garg’s representative has been asked to respond to the allegation, the representation-letter dispute, and Better’s statement that he was terminated rather than leaving through a mutual agreement.
Two Versions Of Better’s Turnaround
The control dispute comes as Better reports growing production and revenue but continues to operate at a loss.
Better generated $1.67 billion in second-quarter loan volume, up 38% from $1.21 billion one year earlier. Total net revenue rose 28% to $54.7 million, while its net loss narrowed to $30.6 million from $36.3 million.
Its adjusted EBITDA loss improved to $14 million from $22.9 million, although the second-quarter result included a $6.5 million benefit from the release of a TRID reserve related to loans originated before June 2022.
Platform loan volume reached $912 million and represented 55% of Better’s total. That business includes loans processed through Better’s Tinman technology for partners but funded elsewhere.
Garg argues that the production growth, increased platform adoption, and lower expenses show that his turnaround strategy was beginning to work. His proposal calls for continued cost reductions, further scaling of Tinman, and completion of the planned sale of Better’s U.K. banking operation.
The company’s new leadership has taken a more restrained view.
During Better’s second-quarter earnings call, Lewis said the company would miss its September target for reaching adjusted EBITDA break-even. He asked investors to focus less on headline loan volume and more on contribution margin and product-level economics.
Better expects third-quarter loan volume of $1.375 billion to $1.525 billion, total net revenue of $49 million to $52 million, and an adjusted EBITDA loss of $15 million to $18 million.
Garg contends that without what he attributes to disruption surrounding the Strait of Hormuz, Better would be generating between $5 million and $10 million in positive adjusted EBITDA per month. He did not release a calculation supporting that estimate.
Outside Concerns About Stability
The dispute is also emerging as analysts assess the effect of Better’s leadership transition on its partner-led strategy.
Cantor Fitzgerald downgraded Better to Neutral from Overweight Thursday and cut its price target in half, to $16 from $32. The firm cited both the interest-rate environment and uncertainty following Better’s unexpected management changes.
Cantor said it was moving to the sidelines while Better’s investor and lender partners digest the organizational changes. It nevertheless continued to describe Better’s AI-driven origination technology as a differentiated, lower-cost alternative to legacy systems.
The concern carries particular relevance for mortgage lenders because Better is relying on lender adoption of Tinman to drive its next stage of growth. Platform volume already represents more than half of its reported production.
Better spent Aug. 3 presenting Garg’s departure as an orderly handoff. Eleven days later, the company says it fired him, Garg says he has the votes to remove most of its directors, and the board is raising possible securities-law concerns without disclosing the underlying conduct.
For lenders being asked to build around Tinman, the question is no longer only whether Better’s technology works. It is who will control the company, which strategy will survive, and whether the organization can provide the stability those partnerships require.
