UPDATED: September 15, 5:10 PM: IBuying Opendoor startup announced its IPO plans on Tuesday and confirmed a deal with a. $ 4.8 billion blank check company.
Company fusion Chamed Palihapitiya Hedosophia Holdings II will provide Opendoor with $ 1 billion in cash, the companies said. The deal estimates the launch in San Francisco at $ 4.7 billion, equivalent to its 2019 revenue.
Palihapitiya, which will appear at CNBC’s “Squawk Box” on Tuesday, predicts that Opendoor’s revenue could reach $ 9.8 billion by 2023 and continue to grow. “If you take the guide they have and use it only in the markets where they can expand in the US, with a 4 percent share, it is a business that will earn $ 50 billion,” he said.
Opendoor, which offers cash offers to households, has received $ 1.5 billion since 2014 from investors, including SoftBank, General Atlantic, Fifth Wall and Lennar. It was the last worth $ 3.8 billion following the closure of a $ 300 million round led by SoftBank in March 2019.
“It’s a huge bet for me and I think Opendoor will build a huge and huge deal,” said Palihapitiya, who ticked off several previous successful bets. “It seems to me like bitcoin in 2012, Amazon in 2015, Tesla in 2016 and Virgin last year.”
In a statement, Opendoor said it would have $ 1.5 billion in cash on its balance sheet once the transaction was completed.
Founded by CEO Eric Wu, CTO Ian Wong and investor Keith Rabois, Opendoor pioneered the nascent but growing iBuyer category, in which it competes with Zillow, Offerpad and Redfin. According to analyst Mike Del Prete last year, major iBuyers accounted for $ 8 billion in domestic sales in 2019.
Opendoor’s sales volume was four times that of Zillow, its next biggest rival. The company operates in 21 markets, including Phoenix, Dallas and Atlanta. Last year, Opendoor sold 18,000 homes.
It’s not profitable yet. The company’s financial data shows that Opendoor lost $ 218 million last year after losing $ 131 million in 2018 before interest, taxes, depreciation and amortization. Opendoor predicted a loss of $ 141 million from $ 2.5 billion in revenue this year – a decline in sales attributed to Covid.
During Tuesday’s presentation to investors, the company said it expects to make a profit in 2023 with an expected EBITDA of $ 9 million.
Palihapitiya said he founded SPAC to “democratize” investors’ access to technology startups in Silicon Valley. When he looked at several sectors, real estate became an obvious target. “In the last 20 years and in the last six months, everything that could be bought and sold online has moved online, except,” he said.
Opendoor’s proceeds will include $ 414 million in cash and $ 600 million in stock. Of the $ 600 million, funds managed by BlackRock and the Healthcare of Ontario Pension Plan will receive $ 400 million worth of shares.
Palihapitiya invests $ 100 million, Hedosophia acquires shares for $ 58 million and shares will also be bought by shareholders Access Industries and Lennar.
When a pandemic hit in March, Opendoor and other iBuyers suspended their home purchases. Although Opendoor recovered in May, yes release 35 percent of its employees.