Better sues Garg as founder renews comeback efforts

Vishal Garg isn’t backing down from the company he founded.

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The ex-CEO of Better Home & Finance is formally soliciting shareholder support for his comeback bid, after the lender cried foul over his initial attempts to rally shareholders. The company sued Garg Tuesday in federal court for alleged violations of securities laws, as the fallout from his departure continues. 

Garg left his CEO post Aug. 3, in a move Better initially described as a mutual agreement before characterizing it as a firing. It replaced him with interim Daniel Lewis, a former hedge fund boss. While the board, Garg and Lewis commended the transition in a press release that day, Garg and Lewis have since publicly criticized each other over the ex-CEO’s prior performance, and the new CEO’s leadership as the company’s stock dips.

Better’s lawsuit accuses Garg of misleading shareholders regarding the majority support he alleged to have in his initial bid to return to the CEO post. In an amended Securities and Exchange Commission filing Tuesday, Garg acknowledged an “administrative error” regarding the pledged amount of shareholder support he professed, because of information provided by “the Company’s in-house Securities and Regulatory Counsel.”

Garg however also filed for a formal solicitation of shareholders. He recognized the lawsuit in his filing and called the allegations without merit, pledging to defend against the accusations.

The dispute

The former CEO began his comeback attempt last week, retaining high-profile counsel and issuing demands to Better’s board of directors. His attorneys said Garg held signed declarations from investors representing a majority of the company’s shareholders, who supported his multi-layered return plan. 

Garg proposed replacing Lewis with himself and removing most of the company’s directors. He pledged to work for a $1 salary until the company became profitable, and to embark on an independent search for a long-term CEO. The new plan also includes a $30 million stock buyback and a $5 million personal investment as part of a 10b5-1 stock plan. 

Better balked at those demands and accused Garg of miscommunicating the amount of shareholder support he secured, noting different numbers he quoted in a television interview and a text message to a shareholder. The lender also suggested Garg bypassed SEC rules in quickly assembling his shareholder group without proper disclosures. 

The lawsuit asked a judge to force Garg to file accurate SEC filings regarding his group, and to cease improper solicitation of shareholders.

New developments

This week Garg filed amended disclosures, revealing that he and his affiliated entities own 13.7% of the company’s voting stock, which they’re using to launch the formal solicitation. In addition to seeking to reshape leadership, seeks to repeal bylaws passed after August 2023 to prevent current directors from halting his return attempt.

Garg also described a detailed timeline of events following his departure, including rising concerns from employees, investors and business partners over the company’s immediate stock decline. The ex-CEO told board members he would return to work alongside Lewis, who doesn’t have fintech and AI experience, and they in turn allegedly invited Garg to demonstrate a majority of shareholder support, leading to the latest developments.

The ex-CEO also criticized Better’s post-departure conduct. That included criticizing its handling of a joint signing off of a recent earnings statement, and stating that directors acknowledged factual inaccuracies in Better’s first press release in response to Garg’s comeback efforts. 

Adding to his social media critiques, Garg wrote that Lewis is reputedly running Better from his chateau in the south of France for the remainder of the summer, in contrast to Garg’s on-the-ground management efforts. 

Better’s stock fell drastically after Garg’s removal, from a height of $27.30 per share on the afternoon of his final day, to $17.27 per share the following trading session. The stock has since sputtered, but ticked up in early trading Wednesday to $13.35 per share.