From Delisting Risk to 500% Surge in a Month: The Opendoor Phenomenon [Business & Issues]

Soaring as a Popular 'Meme' Stock
Continued Poor Performance Since COVID-19
Stock Price Volatility Likely to Persist

OpenDoor Homepage

Opendoor, a U.S. real estate transaction platform company, has seen its stock price soar suddenly despite facing the risk of delisting, drawing significant attention to the reasons behind this surge. The company, which has never posted a profit since its listing due to the downturn in the U.S. real estate market, is now being referred to as a representative 'meme' stock that has skyrocketed due to word-of-mouth on the internet. Experts have pointed out that, as stock price volatility has become extremely high, investors need to exercise caution.

Stock price surges 500% from delisting risk at 50 cents... Emerges as a leading 'meme' stock

On the U.S. Nasdaq exchange, Opendoor's stock price was just $0.56 at the beginning of this month, not even reaching $1. Since May, the share price had started to fall below $1, and by the end of May, the company received a warning from the Nasdaq exchange that it could be delisted. On the Nasdaq, a listed company is subject to delisting if its stock price remains below $1 for 30 consecutive trading days.

However, on July 21, the stock price suddenly soared to $3.21, marking a 527% increase compared to the beginning of July. Afterward, on July 24 (local time), profit-taking led to a decline to $2.42, but the price still remains nearly five times higher than at the start of the month. As Opendoor became known as a representative meme stock that surged due to word-of-mouth on social media and online communities, a sharp influx of buying occurred.

In particular, when Eric Jackson, the founder of Canadian hedge fund EMJ Capital and a well-known investor on social media, named Opendoor as a promising stock, investor enthusiasm soared. On Reddit, a popular U.S. stock discussion forum, he claimed, "Opendoor will record its first positive EBITDA next month," and predicted, "Opendoor's stock price could reach $82."

Still no profits since 2020 listing... Highly sensitive to housing and interest rate fluctuations

OpenDoor Homepage

Opendoor is a real estate transaction platform company founded in 2014, operating as an 'instant buying' company that purchases homes directly from owners without intermediaries, renovates them, and quickly resells them to consumers. After going public in 2020 through a SPAC (Special Purpose Acquisition Company), its stock price soared to $34.59 in February 2021, gaining popularity. However, as the U.S. housing market rapidly slumped, the stock price began to plummet.

Furthermore, Opendoor has struggled to turn a profit since its listing. According to CNBC, Opendoor posted a net loss of $662 million in 2021, which sharply increased to $1.4 billion in 2022. In 2023, the net loss was $275 million, and last year, it was $392 million. Since 2022, U.S. interest rates have risen significantly and borrowing has become more difficult, leading to a sharp decline in housing demand. As a result, the company has been unable to turn a profit due to heavy debt burdens and a large inventory of homes.

However, as expectations for lower U.S. interest rates in the second half of this year have grown, hopes for a recovery in housing transactions are also rising. Some analysts point out that the absence of competitors?since former rivals such as Zillow and Redfin have completely withdrawn from this business?could become an advantage for Opendoor if the real estate market recovers.

Stock price remains highly volatile... Investors should exercise caution

Reuters Yonhap News

Amid a mix of expectations for a real estate market recovery and concerns about earnings, Opendoor's stock price continues to fluctuate sharply. Experts warn that, as Opendoor has gained popularity as a meme stock, its stock price volatility is high and investors should be cautious.

According to CNBC, Opendoor's stock price reached a yearly high of $3.21 on July 21, then fell to $2.88 on July 22 and $2.29 on July 23, before rebounding to $2.42, continuing its volatile swings. As the stock gained fame as a meme stock, a surge in short-selling orders has greatly increased the risk of sharp price fluctuations.

Bespoke Investment, a U.S. investment firm, noted in a memo to clients, "Opendoor's stock price has risen more than 500% in three weeks, and the number of open interest contracts has more than tripled," adding, "Although the stock has shown a sharp upward trend even as most other stocks have declined, more than 20% of available shares are in a short position, so liquidations could occur during the rally, making caution essential."