Some shareholders of a16z-backed Divvy Homes may not see a penny of the $1 billion sale.

The A $1 billion acquisition rent-to-own startup Divvy Homes, announced Wednesday, is expected to leave some shareholders unpaid, according to sources familiar with the deal.

The conditions — and Divvy’s journey from buzzy startup to acquisition target — reflect the rollercoaster ride the proptech industry has endured over the past decade.

Founded in 2016, the San Francisco-based startup has raised more than $700 million in debt and equity from notable investors such as Tiger Global Management, GGV Capital, and Andreessen Horowitz (a16z), among others. By 2021, the company’s value was $2.3 billion.

While Brookfield Properties’ $1 billion purchase of Divvy is half of its peak valuation, the purchase can still be considered a victory in an industry that has been plagued by a series of closings and bankruptcies.

However, this is 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 all of its assets, including its home portfolio and brand, to Brookfield for approximately $1 billion. However, after paying its outstanding debt, operating expenses and liquidation privilege to preferred stockholders, we regrettably believe that neither common stockholders nor holders of Series FF preferred stock will receive any benefits.” former employees and “Divvy supporters”.

FF preferred stock, also known as Founders Preference Share, is a type of stock issued to the founders of a company. This may mean that the founders of the company will not receive income from the sale.

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

Another source told TechCrunch that shareholders “received zero,” so “founders, employees and VCs” will get “nothing” from the sale. The source, who asked not to be named, was confirmed by TechCrunch.

Divvy ran a model where it works with renters who want to become homeowners by buying the home they want and renting it back for three years while they build up “the savings needed to own it.” .

The company experienced some hiccups when mortgage rates started to rise in 2022, and it three known rounds of cuts within a year. Divvy’s last known funding round was in August 2021. $200 million in Series D funding Managed by Tiger Global Management and Caffeinated Capital. A Series D round was announced just six months later $110 million Series C.

Hefets said in the letter that “the decision to sell was not an easy one” and “came after a thorough review of Divvy’s strategic alternatives … and significant discussions surrounding our options.”

He said the move came after “fighting tough market conditions, including high interest rates, and cutting costs as much as possible.”

As the company examines what lies ahead in 2025, it has decided the best course of action is to “sell the home portfolio now and return as much capital to shareholders as possible.”

“Having dedicated myself to this company and believed in this mission for almost a decade, this was not the end I expected… While I am not proud of the financial results, I am proud of the impact we have made on our customers. lives,” Hefets added.

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