iBuying Giant Opendoor Is Going Public Through a Merger

September 16, 2020

The company that helped to set off a wave of iBuying and instant cash offers is going public. Through a merger with Social Capital Hedosophia Holdings Corp. II, Opendoor will become a public company. The deal will value the online residential real estate transaction company at $4.8 billion.

Opendoor is one of the latest startups to go public through a special purpose acquisition company, often called blank-check companies, Bloomberg reports. SPACs are offering startups a faster route to go public without the traditional risks of an initial public offering.

“This is one of many milestones towards our mission and will help us accelerate the path towards building the digital one-stop-shop to move,” Eric Wu, co-founder and CEO of Opendoor, told TechCrunch.

Opendoor makes instant cash offers to home sellers who wish to bypass the traditional route for selling, often for the sake of a quicker sale. Homeowners tend to pay more in commissions for the convenience.

As the COVID-19 outbreak started in the U.S. this spring, however, Opendoor, like other iBuyers, paused operations. Opendoor at the time had announced plans to lay off 35% of its staff as the newer iBuying model was affected by a suddenly cooling housing market.

However, the housing market came roaring back as states began to reopen, which prompted Opendoor and the iBuying model to re-emerge. iBuyers can often transact socially distant and over technology, which is helping business to climb.

iBuyers could “drive an enormous amount of homeownership,” Chamath Palihapitiya, chairman of Social Capital II, a blank-check company, told CNBC in a recent interview.

Opendoor sold more than 8,000 homes last year and generated $4.7 billion in revenue, according to the company. The company plans to expand to 100 markets. It currently operates in 21. It’s also targeting revenue of $50 billion a year.

“The trade-off between profitability and broad appeal is an interesting question,” Tom White, an analyst at D.A. Davidson & Co., told Bloomberg. “For these businesses to have the broadest appeal and best shot at widespread adoption by home sellers, they’ve got to get their pricing as competitive as possible relative to a sale through a traditional agent.”