PSPC’s upcoming IPO predicts 650% revenue growth by 2023
IInnovative and technology-driven mortgage loan, Better is set to go public through a SPAC merger with Aurora Acquisition Corp. (NASDAQ: AURC). Better’s recent results have been extremely impressive, and the company expects its revenue to multiply several times over the next several years.
In this fool live Video clip, recorded on September 27, Fool.com contributors Matt Frankel, CFP, Danny Vena and Jon Quast discuss Better’s business and whether its growth projections are realistic or perhaps a little too ambitious.
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Matt Frankel: It’s better, the mortgage company. I don’t know if any of you refinanced your house last year. I think everyone who owns a home has refinanced it in the last 18 months or so. Some twice.
Danny Vena: If they were smart.
Frankel: Law. Some have done this twice to my knowledge. Better a mortgage lender. They specialize in refinancing so as you can imagine they have had a fantastic 2020. They have also tried to try to leverage their technology to do better mortgage lending. I used Better for my refinance in 2020. This is what first caught the company’s attention on my radar. The name holds up, it was a better business or a better process. Better to prepare to go through PSPC to answer Kim’s question he just asked in the chat.
Better to prepare to go public via PSPC. They still trade under their symbol SPAC, Aurora Acquisition Company. Ticker symbol AURC right now, although we write it last, you might not want to enter it in your buy button on your brokerage house. They do mortgages, they also provide a realtor matchmaking service. If you don’t have an agent yet, they will do so without you having to find one.
They’re also planning to launch some kind of more personal financial ecosystem with personal loans, auto loans, things like that next year. That worries me. I don’t like to see companies venturing outside their core competence. I hate to see companies trying to get too big too fast, but it’s neither here nor there. In 2020, Better issued $ 24 billion in mortgages. This has given it a roughly 0.5% share of the mortgage market and roughly 400% year-over-year growth.
Now, as we mentioned, take that 400% growth figure with a big grain of salt, everyone is refinancing in 2020. All mortgage lenders look fantastic if you just look at 2020. Excuse me , going forward, all of PSPC’s IPOs have pretty crazy projections. I’m sure you noticed that.
Jon Quest: They sometimes project until 2030.
Frankel: Law. It’s always like a multiple of where they are now. Better projects a loan volume of $ 181 billion in 2023. They were at $ 24 last year, or $ 24 to $ 181. Take this with a big grain of salt, and where I take issue with their projection is that they expect mortgage volumes to double in 2021 from 2020 levels.
They had an origination volume of $ 24 billion last year. They are projecting $ 57 this year. Now, unless rates continue to dip dramatically, the housing stock is really back to historic standards and the stars are aligning. I don’t see them getting to this. Having said that, it’s still a pretty impressive undertaking. The mortgage process is very broken. There are a lot of little pieces to buy a house. They can really be consolidated and combined and made more effective. Do either of you own it?
Quarter: Yes. I just bought a house in the last year, used the guaranteed rate, but it is a frustrating process for most things.
Vena: Yes. I am a homeowner who has just refinanced and I think the process is definitely broken. The amount of paperwork you have to provide is just ridiculously high.
Frankel: Law. Better aims to consolidate this process. Not only do they close faster, but their average loan funding freeze rate is 37 days compared to 51 for the industry average, two weeks less than the industry average. If you watch this, I’m just going to share a slide on my screen for a second. Excuse me. Jon recently bought a house. I’m sure he’s familiar with all those tiny tiny parts that you see listed around that little wheel. If you have a condo, you don’t have to pay for some of them. But even so, it’s all these little pieces that Better really wants to consolidate into one process.
This is really where the potential lies. There is $ 2 trillion in mortgage volume originating in the United States every year. If you include overseas mortgages and all of those adjoining services, that’s $ 15 trillion in consumer spending every year. $ 15 trillion. I don’t know of any other market this big. But like I said, their projections are a bit off balance, which gave them sort of a high valuation.
Danny Vena has no position in the stocks mentioned. Jon Quast has no position in the stocks mentioned. Matthew Frankel, CFP has no position in the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.