The $1 billion acquisition of rental management startup Divivi Homes announced Wednesday is expected to result in some shareholders losing out on dividends, according to people familiar with the deal.
This condition, and Divvy's journey from buzzy startup to acquisition target, reflects the rollercoaster ride the proptech industry has endured over the past decade.
Founded in 2016, the San Francisco-based startup has raised more than $700 million in debt and equity from prominent investors including Tiger Global Management, GGV Capital, and Andreessen Horowitz (a16z). Ta. By 2021, the company was valued at $2.3 billion.
And while Brookfield Properties' $1 billion acquisition of Davy was half its peak valuation, it was still a victory in an industry plagued by closures and bankruptcies.
But this is a loss for some shareholders, according to a letter from Divvy CEO and co-founder Adena Hefets seen by TechCrunch.
“Upon completion of the transaction, Divvy will sell substantially all of its assets, including its portfolio and brands, to Brookfield for approximately $1 billion. However, according to a letter sent to shareholders, After repaying the debt, transaction costs and liquidation preference to preferred stockholders, we unfortunately do not expect that either common stockholders or holders of Series FF Preferred Stock will receive any consideration. Supporter”
FF preferred stock, also known as founder preferred stock, is a type of stock issued to the founders of a company. Law firm Cooley defines stock as being issued to founders “at the time of incorporation to facilitate the sale of shares by the founder in connection with future equity financing.”
TechCrunch has reached out to Hefets and Divvy Homes for comment and will update this article if we hear back.
Another source told TechCrunch that the “founders, employees and venture capitalists” will “get nothing” from the sale as stock ownership “has gone down to zero.” The identity of the source, who requested anonymity, was confirmed by TechCrunch.
Divvy operated a model in which it worked with renters who wanted to become homeowners, buying the home of their choice and renting it for three years, during which time they would “save up enough to own their own home.” . .
The company ran into some problems in 2022 when mortgage rates started to rise sharply, resulting in three known layoffs within a year. Divvy's last known funding occurred in August 2021. $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.
“The decision to sell was not made lightly,” Hefetz said in the letter, “after a thorough review of strategic alternatives for Divvy…and after a thorough consideration of our options.” He also said:
He said the move was the result of “years of battling difficult market conditions, including rising interest rates, and cutting costs wherever possible.”
As the company considered what 2025 had in store, it decided that the best course of action was to sell its residential portfolio now and return as much capital as possible to shareholders.
“After almost 10 years of dedication to this company and believing in this mission, this was not the outcome I wanted…While I am not proud of our financial results, I'm proud of the impact it has had on our customers' service.'' Hefetz added.
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