The $1 billion acquisition of rent-to-own startup Divvy Homes, which was announced Wednesday, is expected to leave some shareholders without a payout, according to sources familiar with the deal.
The terms — and Divvy’s journey from buzzy startup to acquisition target — reflects the rollercoaster ride the proptech industry has endured over the past decade.
The San Francisco-based startup, founded in 2016, had 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 was valued at $2.3 billion.
And while the Brookfield Properties purchase of Divvy for $1 billion was at half of its peak valuation, the acquisition could still be considered a win in an industry that has had a string of shutdowns and bankruptcies.
However, it’s a loss for some shareholders, according to a letter from Divvy CEO and co-founder Adena Hefets, which was viewed 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,” 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 that is issued to founders of a company. The law firm 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 comment and will update the article with any response.
Another source told TechCrunch that equity hold …