Business context and reporting period
This is Aurora Acquisition Corp.’s Form 10-K for the year ended December 31, 2022, filed April 17, 2023. Despite the request metadata, the filing is for Aurora, a Cayman Islands blank-check company, not an operating-company 10-K for Better Home & Finance. Aurora had no operating revenue or business operations; the proposed merger with Better remained pending.
The proposed transaction valued Better at an implied equity value of approximately $6.9 billion and post-money equity value of approximately $7.7 billion. The merger agreement deadline was extended to September 30, 2023. After substantial redemptions at the February 2023 extension vote, the filing reports approximately $21.1 million remaining in the Trust Account at March 31, 2023.
Financial performance and condition
| Metric | 2022 | 2021 |
|---|---|---|
| Operating revenue | None | None |
| Operating costs / operating loss | $8.58 million | $8.12 million |
| Net income (loss) | $8.74 million | ($6.53 million) |
| Net cash used in operating activities | $1.15 million | $3.24 million |
| Cash outside Trust Account, year-end | $285,307 | $37,645 |
- Revenue-based margins are not meaningful: Aurora reported no operating revenue. 2022 net income primarily reflected a $12.87 million noncash gain from the decline in fair value of warrant liabilities and $4.26 million of Trust Account interest, offset by operating costs.
- At December 31, 2022, Trust Account assets were $282.28 million; total assets were $282.70 million. Total liabilities were $15.50 million, including $2.81 million of related-party loans, $4.71 million of accounts payable and accrued offering costs, and a $7.50 million deferred credit liability. Working capital deficiency was $14.61 million.
- Redeemable Class A shares were presented outside shareholders’ equity at $246.63 million. Reported shareholders’ equity was $20.58 million.
- Cash flow from investing activities was zero in 2022; financing activities provided $1.40 million, principally from related-party borrowing.
- There was no deferred underwriting fee payable at year-end: Barclays waived its approximately $8.5 million fee after resigning. Aurora also reported a $182,658 gain on the deferred underwriting fee in its 2022 income statement.
Material changes and subsequent events
- Net income improved from a 2021 loss to 2022 profit, largely due to the much larger fair-value gain on warrant liabilities and higher Trust Account interest; this does not reflect operating growth.
- In February 2023, shareholders approved extending Aurora’s business-combination deadline to September 30, 2023. Public shareholders redeemed 24.09 million shares and the Sponsor redeemed 1.66 million, for aggregate payments of approximately $263.12 million.
- Better agreed to reimburse Aurora for eligible transaction expenses up to $15 million. The filing reports $7.5 million paid in 2022 and a further $3.75 million paid February 6, 2023; up to $3.75 million more was scheduled for April 1, 2023.
- Better had issued $750 million of bridge notes, purchased by SB Northstar LP ($650 million) and the Sponsor ($100 million). If the merger closes, the notes are to convert into shares; if it does not close by the applicable deadline, other conversion outcomes apply. A February 2023 agreement gave the Sponsor potential conversion alternatives at substantial discounts to Better’s stated pre-money valuation.
- Aurora instructed the Trust Account trustee in February 2023 to hold the funds in cash rather than Treasury securities or money-market funds. The filing warns this may result in minimal interest and reduce redemption or liquidation proceeds.
Outlook, risks and unusual items
- The auditor’s report includes a going-concern explanatory paragraph, citing a significant working-capital deficiency, losses, need for additional funds, and the September 30, 2023 mandatory liquidation deadline if no business combination is completed. The financial statements include no adjustments for the outcome of this uncertainty.
- The merger was not assured. Aurora disclosed that Better could pursue alternative financing and remain private, and that Aurora might then be unable to complete another combination before its deadline. Significant further redemptions could leave insufficient cash to meet transaction conditions or listing requirements.
- Barclays and Citigroup resigned from advisory roles in 2022; Barclays and Citigroup waived fees of approximately $8.5 million and $7.5 million, respectively. The filing cautions investors not to rely on their prior involvement. It also says the board did not obtain a third-party valuation of Better.
- The SEC requested documents in 2022 in an ongoing investigation concerning Aurora and Better; Aurora said it was cooperating and could not predict the outcome. Two shareholder demand letters alleged omissions in transaction disclosures. A separate Pine Brook dispute was settled and dismissed with prejudice in 2021.
- Management concluded disclosure controls and internal control over financial reporting were ineffective due to material weaknesses in accounting for complex financial instruments and unusual transactions, and in reconciling related-party expenses and accounts payable. Prior 2021 and 2022 interim reports were restated in April 2023. Remediation was underway, with no assurance the measures would be effective.
- Other risks include potential Nasdaq listing issues, creditor claims against Trust Account proceeds, possible dilution, and the possibility that public warrants become worthless if Aurora liquidates.
Important facts for investors to verify
- Confirm the current status and terms of the Better merger, including all closing conditions, financing arrangements, and the September 30, 2023 deadline or any later extension.
- Reconcile the post-redemption Trust Account balance and available closing cash with the $21.1 million reported at March 31, 2023, and assess the effect of further redemptions.
- Review Better’s standalone financial results and liquidity separately; this Aurora 10-K does not provide a clear set of Better operating metrics.
- Check the status and potential consequences of the SEC investigation, shareholder disclosure demands, and any subsequent legal or regulatory developments.
- Assess whether the identified control weaknesses have been remediated and whether the restated prior-period financial statements affect transaction analysis.
- Evaluate the bridge-note conversion terms, Sponsor arrangements, dilution, and any required additional financing against the final transaction documents.