New York Supreme Court and Delaware Court of Chancery issued coordinated rulings this week blocking Better.com's poison pill defense, clearing procedural ground for founder Vishal Garg's proxy campaign against the board he no longer chairs. The New York court granted a temporary restraining order preventing enforcement of the rights plan adopted in December. Delaware followed with a parallel injunction hours later. Neither ruling addresses the merits of Garg's attempt to retake control, but both courts found sufficient preliminary grounds to prevent the company from deploying dilution mechanics before discovery concludes.
Better.com's board installed the poison pill after Garg, who remains the largest individual shareholder with an estimated 31% stake, announced his intent to nominate a competing slate for the annual meeting scheduled for late March. The pill would have triggered if any shareholder crossed 15% ownership without board approval, a threshold Garg already exceeds but which the company argued applied to cumulative acquisitions post-adoption. The structure was designed to force negotiation rather than block Garg outright, but the courts found the timing—adoption 17 days after proxy notice—raised questions about whether the board acted to entrench itself rather than protect shareholder value during a going-concern evaluation.
The dual-state coordination is unusual but not unprecedented for a company that operates significant subsidiaries in Delaware while maintaining New York headquarters and primary litigation venue. Garg's legal team argued the poison pill was pretextual, pointing to Better's $440 million cash position and the absence of any hostile third-party bid. The board's public rationale cited ongoing strategic review and concern that a rapid governance change would disrupt negotiations with potential acquirers. Discovery will now examine board minutes, banker communications, and internal assessments from the three-week period between Garg's proxy notice and the pill's adoption.
What matters for allocators is not the governance spectacle but the underlying capital structure tension. Better.com burned $184 million in the first nine months of 2024, down from $312 million the prior year, but still operating at a pace that makes the cash runway a 2026 concern without additional financing or a sale. The company has been exploring strategic options since August, including conversations with SoftBank—Garg's largest institutional backer—about a potential take-private. If Garg wins board control, SoftBank's position becomes the fulcrum: the Vision Fund holds roughly 22%, and any transaction that takes Better private would require SoftBank to either double down or accept dilution. The poison pill's removal doesn't change that dynamic, but it does clarify that Garg can force a vote without navigating judicial review of every incremental share purchase.
Operators and allocators should watch three dates. First, Delaware discovery runs through mid-February, with a preliminary injunction hearing likely in the third week of the month. Second, the annual meeting is scheduled for March 28, though the board can delay up to 30 days under New York law if litigation remains unresolved. Third, Better's Q4 2024 results are expected by late February, and the cash burn trajectory will inform whether the strategic review concludes with a sale, a restructuring, or Garg's return as executive chair with a mandate to cut further.
The poison pill's collapse tells allocators the board lacks confidence it can win a governance referendum on substance. That is the signal, not the procedural ruling.