Some owners of a16z-backed Divvy Homes may not see the money from the $1B sale

The Earning $1 billion The merger between renter and owner Divvy Homes, which was announced on Wednesday, is expected to leave some shareholders unpaid, according to sources familiar with the deal.

The statement – and Divvy’s journey from rough start to acquisition target – highlights the uphill climb the proptech industry has endured over the past decade.

The startup from San Francisco, which was founded in 2016, raised more than $700 million in debt and capital from well-known investors such as Tiger Global Management, GGV Capital, and Andreessen Horowitz (a16z), among others. By 2021, the company was worth $2.3 billion.

And while Brookfield Properties’ purchase of Divvy for $1 billion was half of its valuation, the acquisition could be considered a victory in a company that has been stalled by massive returns.

However, it is a loss for some owners, according to a letter from Divvy CEO and co-founder Adena Hefets, which was seen by TechCrunch.

“If the transaction closes, Divvy will sell all of its assets, including its home and brand, to Brookfield for approximately $1 billion. However, after refinancing its existing debt, acquisition costs, and discounting preferred stockholders, we unfortunately estimate that even common shareholders or holders of Series FF preferred stock will not be considered,” according to the letter, which was sent to shareholders, former employees, and “supporters of Divvy.”

FF preferred stock, also known as Founders Preferred Stock, is a type of stock issued to the founders of a company. Law firm Cooley explains that these shares are issued to the founders “at the time of the merger to facilitate the sale of shares by the founders in relation to future investments.”

TechCrunch has reached out to Hefets and Divvy Homes for comment and will update this article with any response.

Another source told TechCrunch that the equity holders “earned zero” so “founders, employees and VCs” will get “nothing” from the sale. The identity of the source, who asked not to be identified, was confirmed by TechCrunch.

Divvy used a mortgage model in which it works with borrowers who want to become homeowners by buying the home they want and leasing it for three years while they build up “the necessary financing to own it,” it said. .

The company faced some challenges when interest rates started to rise in 2022, which led to it doing so. three distinct stages of layoffs in the course of a year. Divvy’s last funding took place in August 2021 – $200 million in Series D funding led by Tiger Global Management and Caffeinated Capital. The Series D round was announced six months later $110 million Series C.

Hefets also shared in the letter that “the decision to sell was not an easy one” and “came after careful consideration of Divvy’s alternatives … and careful consideration of our options.”

He said the move followed “years of struggling with market pressures, including rising interest rates, and reducing as much capital as possible.”

When the company looked at the future in 2025, it decided the best way was to sell “its buildings now and return as much money as possible to the owners.”

“After nearly ten years of devoting myself to this company, I believe in this work, this was not the end I expected… life,” added Hefets.

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