In June, with its shares trading for $0.51, Opendoor Technologies was about to get delisted from the Nasdaq. Then, it became a meme stock (opens in new tab).
Over a span of three months, individual investors, now dubbed the “Open Army,” rallied around the company and pushed Opendoor’s shares up as high as $10, vaulting it to a valuation of nearly $7 billion.
But the sugar high of retail traders can only prop up unprofitable business for so long. Other meme stock companies such as Gamestop and AMC Theaters fell back to earth after failing to generate more returns through actual reforms.
Opendoor — which aims to become the leading marketplace for current and prospective homeowners — might have a different ending if it can pull off its next high-wire act.
Ahead of the company’s earnings call on Thursday, new CEO Kaz Nejatian sat down with The Standard at the company’s San Francisco headquarters at 100 Montgomery St. to detail how his first two months in charge have gone, and how he intends to turn the languishing company’s fortunes around.
Before he arrived, Opendoor had reported annual losses every year since it was founded in 2014. The real estate platform buys single-family homes for cash and resells them, which in effect, gives buyers and sellers an instantaneous, end-to-end shopping experience online. But the economics of this model were squeezed when interest rates spiked in 2022 — pulling home values down and saddling the company with losses.
With an eye toward turning a profit by the end of next year, Nejatian said the company is refinancing its long-term debt and has already instituted sweeping organizational changes including firing every outside consultant that Opendoor employed, calling all of its employees back into office full-time, and mandating that they “default to AI” when solving problems.
“Imagine if you hired someone else to do your job and they tell you what to do,” Nejatian said. “I find that so deeply offensive.”
But the biggest change he is trying to instill is one of mentality.
“Our job is not to run a fucking hedge fund that aims to own assets and make money off of marcoeconomics,” Nejatian said. “Our job is to buy and sell lots and lots of homes at very tight spreads and make money off of transaction volume.”
In other words, he wants Opendoor to spend less time worrying about Wall Street’s expectations and more time building the next Amazon for home sales altogether, which today, is still a mish-mash of different listing websites, third-party agents, and opaque pricing strategies.
To do so, Opendoor will have to re-commit to making new software while doubling down on home acquisitions, Nejatian said. By increasing the number of sellers in the company’s platform, prospective buyers are more likely to choose to transact with the company rather than work with a real estate agent. As of September 30, the company was in contract to purchase 526 homes for an aggregate price of $164 million.
Once they do, Opendoor aims to deliver services such as its own guaranteed warranty to distinguish itself. Starting this week, in Texas, a buyer on the platform can buy a home instantly online without talking to a human and return it within seven days of moving in if they are not satisfied with the purchase.
“If Opendoor does nothing else than help you time the sale of your old house with the closing of your new house … you will avoid on average about three mortgage payments,” Nejatian said on the a16z Podcast last month. “Who was getting paid that money and why?”
Nejatian was installed as Opendoor’s CEO after investors pressured the company’s board to make changes in August. Before then, he was COO of e-commerce platform Shopify from 2019 to this year, which similarly had to fight off predatory short-sellers and pivot business models after trying to compete with Amazon’s fulfillment business. By the time he departed the company, it had gone from operating at a loss to turning an annual profit.
“I thought Shopify was going to be my forever job,” he said.
So why did he leave to jump into another sinking business? Solving the housing problem is essential to society, Nejatian, who is making only a $1 salary, said. His compensation consists entirely of options that are tied to Opendoor’s stock performance.
“If we can make buying, selling, and owning a home easier and less terrible, the world will be a better place,” he said. “If we do that, we’ll make money along the way.”
“The fact that the average age of a person who buys their first home now is 40 is deeply depressing,” he added. “That has such negative implications for our society. Our job is to build a profitable company in this space.”
There are obstacles unique to real estate that will make this vision difficult to realize. Software may have democratized the sale of rideshares or food deliveries online, but home sales are not as frequent, and variables such as local regulations, school districts or natural lighting can swing prices by thousands dollars.
Nejatian said today’s technology, supercharged by AI, is capable of tackling those problems, whereas competitors such as Zillow and Redfin have previously tried and failed to make their own end-to-end home selling businesses.
During the earnings call, he added that the eventual tokenization of homes — the concept of turning ownership into digital assets that can be easily traded and verified — will be essential to making this ecosystem possible. But the nascent technology, most associated with collectibles and art, has yet to be realized in real estate, and Opendoor does not yet have a token product to announce.
“I can’t imagine a future where real estate is not tokenized,” he said. “Asset tokenization is not a sidequest for us.”
To usher in this next phase of the company, which is dubbed internally as “Opendoor 2.0,” Nejatian said he wants to assemble the “most aggressive” software team in the tech industry. That will involve hiring more engineers and product developers while pulling back from marketing, and empowering the existing operations staff to work more efficiently.
Upon taking his job, Nejatian had Opendoor publish a public accountability dashboard (opens in new tab) where investors can track the company’s progress on its various initiatives. And in his manifesto (opens in new tab) to employees, he said he “values mistakes” and wants them to move fast in lieu of process.
“Businesses don’t grow off Excel sheets,” he said. “We’re aiming for growth regardless of what’s happening in the macro. You can only do that by building and shipping lots of products.”