The Opendoor Deal: The two companies will merge, valuing Opendoor at $4.8 billion. The combined company will have over $1 billion in cash proceeds.
A private investment in public equity of $600 million will include $200 million from transaction insiders. Social Capital Hedosophia Corp II leader and famed SPAC guru Chamath Palihapitiya will invest $100 million of the PIPE.
The transaction is valuing the company at 1x 2019 revenue of $4.7 billion and 0.5x estimated 2023 revenue of $9.8 billion.
About Opendoor: Competing in the highly fragmented home buying market, Opendoor is an on-demand digital experience to buy and sell a home.
The company operates in 21 markets, including large cities like Phoenix, Dallas, Raleigh, Atlanta and Orlando. Opendoor sold 18,799 homes in 2019, which was 4.4x the next largest competitor.
Opendoor competes with Zillow Group Inc (NASDAQ: Z), which has started buying homes in select markets. Opendoor has a partnership and investment from Lennar Corporation (NYSE: LEN), the largest home builder in the U.S.
The real estate market is worth $1.6 trillion, and online home buying represents less than 1% of the market.
Plans for Growth: Opendoor plans on scaling its model to other cities. The current “playbook” calls for the company to gain 4% market share in 100 markets and hit $50 billion in revenue.
The company has 2% market share in the 21 markets in which it competes.
In its first six markets in which it launched, Opendoor reached a 3.2% market share.
Opendoor’s long-term growth plans include value-added services like home upgrades, maintenance and warranty services.
The company recently launched title and escrow and financing services for homebuyers.
IPOB Price Action: Shares of Social Capital Hedosophia Holdings Corp II were trading 18.08% higher to $15.35 at last check Tuesday.
Photo courtesy of Opendoor.
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