Better Home & Finance Holding Company (NASDAQ: BETR) saw its shares plummet 8.47% on Friday, closing at $13.73, as an intensifying boardroom dispute overshadowed the digital mortgage lender's otherwise solid second-quarter performance. The stock traded 1.36 million shares, roughly 2.6 times its average volume, signaling heightened investor anxiety.
The turmoil stems from the board's decision on Friday to remove founder and CEO Vishal Garg, with all directors except Garg voting in favor. The board cited concerns about Garg's "judgment, temperament and credibility," and noted cumulative GAAP losses exceeding $1.5 billion since 2022. Garg, who remains a board member, disputes the board's account and is seeking reinstatement, telling CNN that interim CEO Daniel Lewis had "hoodwinked me."
The governance crisis has shifted focus away from operational improvements. In the second quarter, loan origination volume surged 38% to $1.67 billion, revenue grew 28% to $54.7 million, and total loans increased 42% to 5,724. Net loss narrowed to $30.6 million from $36.3 million a year earlier, while adjusted EBITDA loss improved to $14.0 million from $22.9 million.
However, the adjusted EBITDA figure was bolstered by a $6.5 million reserve release related to pre-June 2022 loans. Excluding that one-time benefit, the loss would have been approximately $20.5 million, representing only a 10% improvement year-over-year, rather than the 39% reported.
Looking ahead, the company's guidance points to a sequential decline. For Q3, the midpoint suggests loan volume will drop 13% to $1.45 billion, revenue will fall 7.7% to $50.5 million, and adjusted EBITDA loss will widen by $2.5 million to $16.5 million. This cautious outlook, coupled with a late-filing warning for its quarterly 10-Q, adds to investor concerns.
Despite the stock's slide, the company holds $102.3 million in cash and equivalents, representing approximately 39% of its market capitalization of $260.85 million. That cash buffer covers about 6.2 quarters of the Q3 midpoint adjusted EBITDA loss, though working capital movements and loan funding could cause significant variation.
Wall Street remains cautiously optimistic, with five of six analysts rating the stock a buy and a mean price target of $25.67, implying 87% upside from Friday's close. However, Cantor Fitzgerald cut its target to $16 from $32 on Thursday, reflecting growing uncertainty. Other analysts, including BTIG's Douglas Harter and Roth MKM's Rohit Kulkarni, reaffirmed buy ratings with targets ranging from $23 to $35.
The company's product mix offers some positive momentum. HELOC volume rose 45% sequentially, and platform partners generated $912 million, or 55% of total volume. Interim CEO Lewis noted that HELOC demand had "exceeded our expectations."
Investors will now focus on the overdue 10-Q, which the company expects to file during the five-day extension period. The filing will provide clarity on whether preliminary results hold up and may offer more transparency on governance issues. The coming week will be critical in determining whether the market can look past the boardroom drama and focus on the underlying business fundamentals.
