Before 2020 comes to an end, there’s a flurry of IPOs on the market with Airbnb and DoorDash taking the lead. Opendoor is another company going public through the SPAC route. It's a real estate startup that enables the buying and selling of property through its digital platform.
Opendoor is going public through a blank-check company, Social Capital Hedosophia II (IPOB), which is associated with billionaire investor Chamath Palihapitiya.
What to expect from the Opendoor SPAC
The news of the merger between the SPAC and Opendoor first surfaced in mid-September and IPOB stock soared 35 percent. The deal gave Opendoor an enterprise value of $4.8 billion, including an equity value of $6.2 billion and nearly $1.5 billion in cash. The new entity will start trading on Nasdaq under the ticker symbol "OPEN" on Dec. 21.
Opendoor discussions on Stocktwits
Investors are discussing Opendoor actively on investing forums including Stocktwits. The company will start trading on Dec. 21 under the new ticker after its merger with IPOB. One user named Benji86 commented, “$IPOB hopefully some sell for penny profits so I can buy another 100 shares under $30. This is my first 10 year hold. I think it will be a 10-50x investment over next decade.”
Another user named GravityHydrogen said, “$IPOB I don't care if it dips this week. Up 100% and holding long.” Most of the investors expect the stock to pop when it starts trading. They are also positive about Opendoor's long-term fundamentals. Some of the enthusiasm is justified considering Opendoor’s disruptive business model, which has the long-term potential to grow.
Should I buy Opendoor stock?
Opendoor is operating in a very fragmented market with nearly 2 million realtors across the U.S. There's a significant potential for consolidation and Opendoor could lead the way. The overall potential is also very huge with online home buying representing just 1 percent of the $1.6 trillion real estate market.
Currently, Opendoor operates in 21 markets and plans to scale this model to other cities. Opendoor's “playbook” calls for the company to gain a 4 percent market share in 100 markets and hit $100 billion in revenue.
Opendoor has a very integrated business model. On the seller side, it offers a platform for sellers to list their properties on and offers to buy property from them. The platform attracts many new sellers to the company who otherwise wouldn't go to a website to list. The company has a proprietary pricing algorithm, which uses 145 features to evaluate the value of a house. The algorithm makes the process fairly straightforward and fast. The platform also has a potential for higher accuracy as more inputs get into the algorithm.
On the buyer side as well, the company offers something extra. It not only enables buyers to bid for properties, it also offers financing services, a very specialized customer experience, and on-demand property information. Opendoor facilitates interaction-less home tours, which has been especially useful amid the COVID-19 pandemic.
Opendoor's business model is distinct with a lot of potential to gain scale. Its management is experienced and can definitely take the company to new heights. Therefore, Opendoor stock seems like a long-term buy.