Some shareholders in a16z-backed Divvy Homes may not see a dime from the $1 billion sale
the Billion dollar acquisition Rent-to-own startup Divvy Homes, which went public on Wednesday, is expected to leave some shareholders without compensation, according to sources familiar with the deal.
The terms — and Divvy’s journey from buzzy startup to acquisition target — reflect the rollercoaster ride the proptech industry has endured over the past decade.
The San Francisco-based startup, founded in 2016, has raised more than $700 million in debt and equity from well-known investors such as Tiger Global Management, GGV Capital, and Andreessen Horowitz (a16z), among others. By 2021, the company was valued at $2.3 billion.
Although Brookfield Properties’ $1 billion purchase of Divvy was at half its highest valuation, the acquisition can still be viewed as a win in an industry that has seen a series of closures and bankruptcies.
However, it’s a loss for some shareholders, according to a letter from Divvy CEO and co-founder Adena Hefets, seen by TechCrunch.
“If the transaction closes, Divvy will sell substantially all of its assets, specifically its home portfolio and brand, to Brookfield for approximately $1 billion. However, after repayment of its outstanding debt, transaction costs and liquidation preference to preferred shareholders, we regrettably estimate that neither common shareholders nor Holders of Series FF preferred stock will receive no consideration for any consideration,” according to the letter, which was sent to shareholders, former employees and “Divvy supporters.”
FF preferred stock, also known as founders preferred stock, is a type of stock issued to the founders of a company. Law firm Cooley defines shares as being issued to founders “at the time of incorporation in order to facilitate stock sales by founders in connection with future equity financing.”
TechCrunch has reached out to Hefets and Divvy Homes for comment and will update the article with any response.
Another source told TechCrunch that stockholders “got zero” so “founders, employees and VCs” would get “nothing” from the sale. The identity of the source, who requested to remain anonymous, was verified by TechCrunch.
Divvy operated a rent-to-own model where it worked with renters who wanted to become homeowners by buying the home they wanted and renting it back to them for three years while they built “the savings to own it themselves,” she said. .
The company faced some hurdles when mortgage interest rates started to rise in 2022, which prompted this behavior Three known rounds of layoffs Within a year. Divvy’s last known funding occurred in August 2021 – Series D financing of $200 million Led by Tiger Global Management and Caffeinated Capital. The Series D round was announced just six months later Series C worth $110 million.
Heifetz also shared in the letter that “the decision to sell was not easy” and “came after a thorough review of Divvy’s strategic alternatives… and with significant deliberation about our options.”
She said the move came after “years of battling difficult market conditions, including rising interest rates, and making as many cost cuts as possible.”
As the company looked to what lay ahead in 2025, it decided the best way forward was to sell “its portfolio of homes now and return as much capital as possible to shareholders.”
“After nearly a decade of working for this company, and believing in this mission, this is not the ending I had hoped for… Although I’m not proud of the financial outcome, I am proud of the impact we’ve made on our customers.” Heifetz added.
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