Divvy Homes Shareholders Could Walk Away With Nothing

Rent-to-own startup Divvy Homes is being sold for $1 billion, but that doesn’t mean shareholders are walking away with a windfall. Some may be walking away with nothing at all.

Common shareholders and holders of Series FF preferred stock — typically awarded to founders of a company — are not expected to receive consideration from the sale, TechCrunch reported, citing a letter sent by Divvy Homes chief executive officer Adena Hefets.

The first to cash in on the startup’s sale include debtholders and preferred shareholders, according to the letter. The company also needs to account for transaction costs involved in its acquisition.

Equity holders, such as VCs, are also expected to get “zero’d” from the sale, a source told the publication.

In the letter, Hefets detailed the difficulty of the decision to sell, saying it “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 wrote. She cited difficult market conditions, including rising interest rates, as rationale for selling the struggling startup.

Maymont Homes, Brookfield’s built-to-rent arm, is acquiring Divvy, according to an announcement made this week.

As of 2021, the startup owned 7,000 homes in 19 markets, a portfolio valued at more than $1.7 billion. The company bought homes for customers and rented them back while setting aside portions of monthly payments for a future down payment. Customers had three years to purchase their home from the startup.

Andreessen Horowitz, Tiger Global Management and Caffeinated Capital were among those to invest. A $200 million funding round in August 2021 brought the company up to a $2 billion valuation.

But the housing downturn ravaged the company’s business model, leading to multiple rounds of layoffs that left the startup with a skeleton staff. Furthermore, customer accounts of dissatisfaction regarding inadequate repairs and a rising threat of evictions were published in outlets such as the New York Times.

— Holden Walter-Warner