Vishal Garg said he had the votes to retake control of Better Home & Finance. His latest SEC filing acknowledges he did not.
Now Better has sued its founder and former CEO, accusing him of making false and misleading statements, secretly coordinating with other shareholders, and violating federal securities laws during his campaign to remove five directors.
The lawsuit, filed Tuesday in the U.S. District Court for the Southern District of New York, asks the court to temporarily stop Garg from soliciting additional shareholder support and invalidate any consents Better alleges were obtained improperly.
Garg responded in an amended Schedule 13D filed with the Securities and Exchange Commission. The filing acknowledges that written consents delivered Aug. 17 did not represent a majority of Better’s voting power, contrary to Garg’s earlier public claim.
His filing blamed the shortfall on an “administrative error” involving information provided by Better’s in-house securities and regulatory counsel. It said Garg and eight shareholders who signed the unsuccessful consents had “disbanded their respective efforts.”
But Garg is not abandoning his effort. He has shifted from claiming he already had control to formally campaigning for it.
The preliminary consent solicitation filed by Garg and affiliated entities seeks shareholder approval to remove interim CEO Daniel Lewis and directors Arnaud Massenet, Bhaskar Menon, Prabhu Narasimhan, and Harit Talwar without cause.
The filing also seeks to repeal any Better bylaw changes adopted after Aug. 22, 2023, before the solicitation is completed, a provision designed to prevent the board from changing the rules during the control fight.
Garg’s group reported controlling approximately 13.7% of Better’s outstanding voting stock. That is a substantial position, but nowhere near the majority needed to remove the directors. The group must now win support from other shareholders through the formal process it initially claimed was unnecessary because the votes had already been secured.
From Claimed Majority To Formal Solicitation
The reversal follows several days of competing claims about whether Garg had enough shareholder support to reshape the board.
Garg initially said shareholders representing more than 50.1% of Better’s voting power had signed declarations supporting his plan. On Aug. 17, his counsel delivered written consents that Garg’s side said represented a majority.
Better rejected that claim and said Garg had fallen short of the votes required.
The next day, Garg’s amended SEC filing conceded the point.
Garg’s amended filing said he and eight other shareholders that had executed and delivered the unsuccessful consents had “disbanded their respective efforts.” It did not disclose how far the consents fell below the required majority.
It did not state how far the consents fell below the required majority.
The formal Garg Group is narrower. Its preliminary solicitation identifies Garg, 1/0 Real Estate LLC, 1/0 Holdco LLC, and the 718 4Ever Trust I as participants. Garg controls the two limited liability companies and serves as investment adviser to the trust, whose sole beneficiaries are members of his immediate family.
The Garg Group said Better’s allegations are without merit and that it intends to defend itself vigorously.
Better Alleges An Undisclosed Shareholder Group
Better’s complaint alleges Garg violated Section 13(d) of the Securities Exchange Act by privately assembling shareholders to act together without promptly disclosing the group’s membership, ownership, agreements, and plans.
The company also alleges he violated Section 14(a) by soliciting shareholder support before filing the required consent-solicitation documents and by making materially false or misleading statements, including his claim of majority backing.
Better is asking the court to stop Garg and anyone acting with him from soliciting further consents until 30 days after he files compliant Schedule 13D and consent-solicitation disclosures.
The company also wants the court to require Garg to correct allegedly misleading statements and declare previously obtained consents, authorizations, or expressions of support void.
Those are allegations. The court has not determined that Garg or any other shareholder violated securities law.
Better said it plans to file its own consent-revocation statement, setting up a formal contest in which Garg’s side will ask shareholders to submit white consent cards and the company will ask them to revoke or withhold that support.
A Fight Over Control More Than Strategy
The filings reveal that the dispute is not built around two radically different operating plans.
Both sides support further cost reductions, continued investment in Better’s Tinman AI platform, the sale of the company’s U.K. banking business, and a search for a permanent CEO.
The central dispute is over who controls those decisions.
Garg’s proposal calls for removing five directors, returning the company to the turnaround plan he led, and appointing him to an executive position. He has offered to work for a $1 salary until Better becomes profitable and invest $5 million through a trading plan.
His plan also calls for a $30 million stock repurchase. Garg would transition to chairman or chief product and innovation officer after a permanent CEO is selected.
Better’s board argues that Garg’s leadership is the problem the company is trying to move beyond. It has cited cumulative GAAP losses exceeding $1.5 billion since 2022, a stock-price decline of more than 90% during his tenure, and concerns about his judgment, temperament, and credibility.
Garg disputes the board’s account and argues that Lewis and the directors moved too quickly, damaged shareholder value, and disrupted an operating turnaround already in progress.
Better initially described the Aug. 3 leadership change as a planned transition, announcing that Garg would leave the CEO position and Lewis would become interim CEO. It later said every director except Garg had voted to terminate him.
According to Garg’s solicitation, Better subsequently offered him a role as vice chairman and senior adviser to the CEO. Garg rejected it because he considered the position too limited and believed he should retain an executive role.
That detail complicates the board’s public argument that Garg was no longer fit to serve in an executive capacity. It also shows how quickly a disputed leadership transition became a fight for control of the company.
Board Removal Could Carry Additional Costs
The preliminary solicitation contains another risk that has received less attention: removing five directors could trigger change-of-control provisions in certain Better contracts and the company’s executive severance plan.
Garg’s filing acknowledges that a successful board removal “may trigger certain change of control provisions or payments.” His group is asking the current board to approve the removals in advance so the campaign would not trigger those provisions.
The filing does not quantify the potential payments or identify every contract that could be affected.
That means shareholders are being asked to consider more than whether Garg or the current board should run Better. The method used to change control could itself create costs or contractual consequences for a company still working to stop its losses.
Better originated $1.67 billion in mortgages during the second quarter, up 38% from a year earlier, while revenue increased 28% to $54.7 million. It still recorded a $30.6 million net loss and a $14 million adjusted EBITDA loss.
Lewis has since acknowledged that Better will miss its previous September break-even target. The company expects a third-quarter adjusted EBITDA loss of $15 million to $18 million.
That is the underlying tension in the fight. Better’s production is growing, but the economics remain underwater. The two sides broadly agree on cost cutting, AI, and finding a permanent CEO. They are now spending time and money fighting over who gets to execute that plan, with Garg’s proposed buyback and potential change-of-control costs adding more claims on capital.
For now, Garg has not proved he holds a majority. Better has not proved its securities-law allegations. What has been established is that a leadership transition presented as orderly less than three weeks ago has become a full proxy fight backed by a federal lawsuit.
