The $1 billion acquisition of startup Divvy Homes, announced Wednesday, is expected to leave some shareholders unpaid, according to sources familiar with the deal. The term — and Divvy’s journey from busy startup to acquisition target — epitomizes the rollercoaster ride the proptech industry has been on over the past decade. The San Francisco-based startup, founded in 2016, has raised more than $700 million in debt and equity from well-known investors such as Tiger Global Management, GGV Capital, and Andreessen Horowitz (a16z), among others. By 2021, the company is worth $2.3 billion. And while Brookfield Properties bought Divvy for $1 billion at half its peak value, the acquisition could still be considered a win in an industry that has seen a string of shutdowns and bankruptcies. However, it was a loss for some shareholders, according to a letter from Divvy CEO and co-founder Adena Hefets, reviewed by TechCrunch. “If the transaction closes, Divvy will sell most of its assets, namely its portfolio and house brands, to Brookfield for approximately $1 billion. However, after paying outstanding debt, transaction fees, and liquidation options for preferred stockholders, unfortunately, we believe that common shareholders or holders of Series FF preferred stock will not receive any consideration,” according to the letter, which was sent to shareholders, former employees, and “Divvy supporters.” FF preferred stock, also known as Founders Preferred Stock, is a type of stock issued to the founders of the company. Law firm Cooley determined the shares were issued to the founders “at the time of incorporation to facilitate the sale of shares by the founders in connection with future equity financing.” TechCrunch has reached out to Hefets and Divvy Homes for comment and will update the article with any response. Another source told TechCrunch that shareholders “get zero” so “founders, employees and VCs” will get “nothing” from the sale. The identity of the source, who asked to remain anonymous, has been verified by TechCrunch. Divvy operates a rent-to-own model that works with renters who want to become homeowners by buying the home they want and renting it back for three years while building up the “necessary savings to own,” he said. . The company experienced some disruption when mortgage interest rates began to rise in 2022, leading to three known rounds of layoffs in one year. Divvy’s last known funding took place in August 2021 – a $200 million Series D funding led by Tiger Global Management and Caffeinated Capital. The Series D round was announced just six months after the $110 million Series C. Hefets also indicated in the letter that “the decision to sell was not easy” and “came after a comprehensive review of Divvy’s strategic alternatives … options.” He said the move follows “years of battling tough market conditions, including rising interest rates, and making cost cuts as much as possible.” house today and generate the most capital for shareholders.” “With almost a decade of dedication to this company, and believing in this mission, this is not the end I want… While I am not proud of the financial results, I am proud of the impact to the customers. live,” added Hefets. Want more fintech news in your inbox? Sign up for TechCrunch Fintech here. Want to get tips? Email me at maryann@techcrunch.com or send me a message on Signal at 408.204.3036. You can also send a note to the entire TechCrunch crew at tips@techcrunch.com For more secure communications, click here to contact us, which includes SecureDrop and links to encrypted messaging apps.
Some a16z-backed Divvy Homes shareholders may not see a dime from the $1B sale
