Business context and reporting period
This unaudited Form 10-Q covers the quarter and six months ended June 30, 2022. The registrant is Aurora Acquisition Corp., a blank-check company—not Better Home & Finance Holding Co. Aurora reported no operating revenue or business operations; its activity concerned the proposed merger with Better HoldCo, Inc. The filing describes an implied Better equity value of approximately $6.9 billion and a post-money equity value of approximately $7.7 billion. Completion remained subject to the transaction’s conditions.
Financial results and position
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 |
|---|---|---|
| Operating revenue | None | None |
| Formation and operating costs | $2.631 million | $3.722 million |
| Net income | $1.786 million | $2.796 million |
| Net income (loss), comparable 2021 period | $(4.849) million | $(6.587) million |
Profit largely reflected noncash gains from remeasuring warrant liabilities: $3.813 million in Q2 and $5.891 million year to date. Q2 also included $420,489 of trust-account interest and a $182,658 gain associated with the deferred underwriting fee waiver. These results do not represent Better’s operating performance.
- Cash and liquidity: $35,275 of operating cash and $278.466 million in the trust account at June 30. Working capital deficit was $9.689 million. Management said available capital and sponsor financing were sufficient to fund operations through a business combination or one year from the filing date.
- Cash flow: Operating cash used was $458,719 for the first half of 2022, versus $2.087 million used in the first half of 2021. Investing cash used was $443,751; financing cash provided was $900,100, principally from sponsor borrowing.
- Liabilities and equity: Total liabilities were $17.498 million, including $2.312 million of related-party loans and $7.449 million of warrant liabilities. Shareholders’ equity was $18.325 million. The $8.505 million deferred underwriting fee liability was eliminated after Barclays waived its fee.
Material changes versus prior comparable period
Aurora moved from losses in the 2021 periods to reported net income in 2022, mainly because warrant fair-value changes shifted from losses to gains. Operating costs increased to $2.631 million in Q2 2022 from $1.213 million in Q2 2021, and to $3.722 million in the first half from $1.312 million. The 2022 results also included the deferred-fee waiver gain; 2021 results included gains from changes in the over-allotment option liability.
Outlook, risks, contingencies, and unusual items
- Aurora had until 24 months after its March 2021 IPO to complete a business combination, with extensions possible subject to shareholder approval. If it does not complete a transaction, it generally must redeem public shares and liquidate; warrants may expire worthless.
- The sponsor’s non-interest-bearing promissory note had a $4 million stated borrowing limit, with a commitment to increase available funding for transaction costs subject to an aggregate cap of $12 million. The filing reports the June 30 balance as $2.312 million in the balance sheet and notes, while MD&A gives $2.312 million with a slightly different final digit; the exact amount is unclear from the filing text.
- Barclays resigned as Aurora’s underwriter and financial adviser on June 22, 2022 and waived approximately $8.5 million in fees. Citigroup resigned as Better’s financial adviser on June 23 and waived approximately $7.5 million. The filing says these departures could adversely affect market perception and increase redemptions; it also states that the parties did not provide reasons and the companies would not speculate.
- Aurora disclosed a voluntary SEC Division of Enforcement request for documents concerning Aurora and Better. The investigation was ongoing; the company could not predict its duration or outcome. Two shareholder demand letters alleged omissions in the merger registration statement; no related lawsuits had been filed. A separate Pine Brook lawsuit was settled and dismissed with prejudice in 2021.
- Disclosure controls were deemed ineffective because of a material weakness in accounting for complex financial instruments. Aurora said it was undertaking remediation and had performed additional analysis for the financial statements. The filing also notes prior restatement of financial statements.
- Management identified COVID-19 as a possible risk to financial position, operations, and the transaction search, but said the impact was not readily determinable. No specific operating guidance was provided.
Important facts for investors to verify
- Confirm the merger’s status, closing conditions, financing arrangements, shareholder vote, and expected redemptions; this filing reports Aurora’s position as of June 30, 2022, not Better’s standalone results.
- Review the SEC document request, the merger registration statement, and any subsequent disclosures regarding the investigation and shareholder allegations.
- Assess the implications of the financial-adviser resignations, including the waived fees and any surviving indemnity or contribution obligations.
- Check sponsor-note availability and outstanding balance, Aurora’s cash needs, and the transaction deadline or any approved extension.
- Track remediation of the material weakness and any further restatements or control findings.