The $1 billion acquisition of rent-to-own startup Divvy Homes, which was introduced Wednesday, is predicted to depart some shareholders with out a payout, in keeping with sources acquainted with the deal.
The phrases — and Divvy’s journey from buzzy startup to acquisition goal — displays the rollercoaster experience the proptech business has endured over the previous decade.
The San Francisco-based startup, based in 2016, had raised greater than $700 million in debt and fairness from well-known traders corresponding to Tiger Global Management, GGV Capital, and Andreessen Horowitz (a16z), amongst others. By 2021, the corporate was valued at $2.3 billion.
And whereas the Brookfield Properties buy of Divvy for $1 billion was at half of its peak valuation, the acquisition might nonetheless be thought-about a win in an business that has had a string of shutdowns and bankruptcies.
However, it’s a loss for some shareholders, in keeping with a letter from Divvy CEO and co-founder Adena Hefets, which was considered by TechCrunch.
“If the transaction closes, Divvy will sell substantially all of its assets, namely its home portfolio and brand, to Brookfield for approximately $1 billion. However, after repaying its outstanding indebtedness, transaction costs, and liquidation preference to preferred shareholders, we unfortunately estimate that neither common shareholders nor holders of the Series FF preferred stock will receive any consideration,” in keeping with the letter, which was despatched to shareholders, former workers, and “Divvy supporters.”
FF most popular inventory, also referred to as Founders Preferred Stock, is a kind of inventory that’s issued to founders of a firm. The legislation agency Cooley defines the shares as being issued to founders “at the time of incorporation in order to facilitate sales of stock by founders in connection with future equity financings.”
TechCrunch has reached out to Hefets and Divvy Homes for remark and can replace the article with any response.
Another supply informed TechCrunch that fairness holders “got zero’d” so “founders, employees and VCs” will get “nothing” from the sale. The identification of the supply, who requested to stay nameless, has been verified by TechCrunch.
Divvy operated a rent-to-own mannequin during which it labored with renters who needed to turn out to be owners by shopping for the house they needed and renting it again to them for 3 years whereas they constructed “the savings needed to own it themselves,” it mentioned.
The firm bumped into some hiccups when mortgage rates of interest started to surge in 2022, main it to conduct three recognized rounds of layoffs in a 12 months’s time. Divvy’s final recognized funding occurred in August 2021 — a $200 million Series D funding led by Tiger Global Management and Caffeinated Capital. The Series D spherical was introduced simply six months after a $110 million Series C.
Hefets additionally shared within the letter the “decision to sell wasn’t easy” and “came after a thorough review of Divvy’s strategic alternatives … and with significant deliberation around our options.”
She mentioned the transfer adopted “years of fighting difficult market conditions, including rising interest rates, and making as many cost cuts as possible.”
As the corporate appeared into what lay forward in 2025, it determined one of the best ways ahead was to promote its “portfolio of homes now and return as much capital as possible to shareholders.”
“With almost a decade of pouring myself into this company, and believing in this mission, this was not the ending I had hoped for…While I am not proud of the financial outcome, I am proud of the impact we had on our customers’ lives,” Hefets added.
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