A top investor in Better Mortgage says the company is using hardball tactics to lock up its shares in a SPAC deal

• Pine Brook Capital Partners, which owns 7% of Better, has sued over the company’s SPAC merger.
• The investor says Better’s CEO used hardball tactics to get it to sign a lockup.
• The company and CEO Vishal Garg have previously been hit with investor lawsuits.

An early investor in the online home-lending startup Better Mortgage has accused the company of trying to force it to accept restrictive investment terms ahead of its planned SPAC merger.

Better said in May that it plans to go public by merging with a special purpose acquisition company at a $6.9 billion valuation. Pine Brook Capital Partners, which invests in energy and financial-services companies, said it owns about 7% of Better.

In a July 26 lawsuit, Pine Brook asked a Delaware court to invalidate parts of the SPAC deal.

Better had a contract with Pine Brook giving it the right to buy back certain shares for the low price of $1 a piece if the company ever decided to IPO, the suit said. But merging with a SPAC isn’t the same as an initial public offering, and early drafts of Better’s SPAC-deal paperwork didn’t account for a buyback, Pine Brook said.

When Better tried to enforce the buyback agreement, Pine Brook decided not to lock up its shares.

Pine Brook said Better then tried to “coerce” it into accepting a lockup agreement by completely changing the terms of the SPAC deal to subject Pine Brook to a lockup anyway.

A Better spokesperson declined to comment. Representatives for Pine Brook and Aurora Acquisition Corp., the SPAC, didn’t respond to requests for comment.

SPACs have been coming under scrutiny from regulators and investors over their disclosures, performance, and projections.

Better’s merger is set to close later this year in a deal that would also see it take an additional $1.5 billion investment from SoftBank.

The company’s valuation has soared in recent months, having been valued at $4 billion in a November round, TechCrunch reported. Unlike many startups with little revenue that have justified their valuations in SPAC mergers based on rapid growth projections, Better is actually profitable, the lawsuit said.

Pine Brook invested in multiple rounds going back to Better’s Series A, the complaint said. The investment firm has about $3 billion under management, PitchBook showed.

Pine Brook stands to make “28x” what it invested in Better, said an email written by Better CEO Vishal Garg that was excerpted in the lawsuit. The email also said that the buyback dispute only concerns 1.8 million shares, out of some 17.2 million that Pine Brook said it owns in the company.

Better and Garg have been hit with investor and cofounder lawsuits over the years relating to “improper and even fraudulent activity,” a 2020 Forbes article said.