In a defensive move, Better Home & Finance Holding Co. has adopted a poison pill aimed at preventing former CEO Vishal Garg and a group of investors from taking control of the company without paying a premium or fully disclosing their plans.
The limited-duration shareholder rights plan, announced Thursday, intensifies a fast-developing fight for leadership of the AI-focused mortgage lender. On Tuesday, Better sued Garg in federal court, accusing him of violating U.S. securities laws through what the board called an “illegal, scorched-earth campaign” to replace directors and reinstall himself as CEO.
A spokesperson for Garg did not immediately reply to HousingWire‘s request for comments.
The rights plan makes Garg’s takeover attempt much harder by providing that if any person or group becomes the beneficial owner of 15% or more of any class of Better’s common stock — or 15% or more of the company’s total voting power — the remaining shareholders can buy additional Better shares at a substantial discount, diluting the acquiring party’s stake.
Better will distribute one Class A right for each share of Class A common stock, one Class B right for each share of Class B common stock and one Class C right for each share of Class C common stock. The recorded date for the distribution is Aug. 31.
The plan does not prevent Garg from fighting for control, since shareholders can still solicit proxies, influence the company, make offers or engage with the board regarding a potential transaction or strategy, the company said.
The plan was approved by a special committee of Better’s board and took effect immediately. It will remain in place until Better’s 2027 annual meeting unless the board redeems, exchanges or terminates it earlier.
Battle against undisclosed investors
The special committee said it adopted the plan in response to efforts by Garg and an undisclosed group of investors that are “acting together” to obtain “abrupt control” of the company without paying a control premium and without properly informing public shareholders of their arrangements or intentions.
“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,” Better said in a news release.
Garg was removed as CEO effective Aug. 3, and Daniel Lewis became interim CEO. But on Aug. 13, Garg said he had shareholder declarations representing a majority of voting power and sought board changes.
On Aug. 14, Better publicly attacked Garg’s record, citing more than $1.5 billion in net losses since 2022 and a more than 90% stock decline during his tenure, while alleging governance and securities issues. Garg has disputed the allegations.
On Tuesday, Better filed a complaint in the U.S. District Court for the Southern District of New York, alleging that Garg secretly assembled a coalition of shareholders “within days” of his removal to remove most of the sitting directors, install his own slate and reinstate himself as CEO, without making timely or complete disclosures about the group’s formation, members, agreements and holdings.
Better also accuses Garg of issuing misleading communications to shareholders — including claims that investors representing more than 50% of the company’s voting power support him — and soliciting support before filing a proxy solicitation statement, as federal law requires.
His amended Schedule 13D filed Aug. 17 shows the group controlling 13.7% of shares, which Better says contradicts his public statements about majority backing.