The recent announcement of Divvy Homes’ $1 billion sale has potentially left some shareholders out in the cold, receiving no profit from the deal.
The Downsides of Divvy’s Acquisition
Despite its significant backing from a16z, Tiger Global Management, among others, and a whopping valuation of $2.3 billion just one year ago, not all Divvy’s shareholders are set to benefit from its sale. According to a letter from Divvy CEO Adena Hefets, common shareholders and holders of Series FF preferred stock are unlikely to receive any consideration from the sale.
Looking into the Affairs
This surprising revelation follows Divvy’s dramatic journey from being a celebrated startup to its current acquisition by Brookfield Properties – a journey emblematic of the turbulence in the proptech industry.
The Complexities of the Deal
Despite the sale being compared to recent failures and closures in the sector, Divvy’s case represents a snag. The selling price, half its peak valuation, reflects its troubled circumstances. After offsetting its outstanding liabilities, transaction costs and preferential payouts, common shareholders may be left empty-handed, according to an anonymous source.
The Model and the Issue
Divvy Homes operated a rent-to-own model, facing hiccups from soaring mortgage interest rates in 2022. This, coupled with numerous layoffs, are believed to be the final blow that led to the sale decision.
Moving Forward
Despite the less-favorable outcome for some, Divvy sees this step as an opportunity to return as much capital as possible to its shareholders. It also maintains a sense of accomplishment towards its customers in a challenging environment, sending a bittersweet message to the proptech industry.
Original source: Read the full article on TechCrunch
