Opendoor is reportedly in talks to go public in coordination with Social Capital Hedosophia Holdings Corp. II, a blank-check company created with the sole mission of acquiring other companies and taking them public, according to a report from Bloomberg.
Social Capital II, already a public company, would seek to raise equity prior to the merger, according to the report. The combined valuation of the company post-merger would clock in at approximately $5 billion. The report, citing people with knowledge of the matter, said the talks are not final and could still fall apart.
Employing the “blank-check” route — more properly known as special-purpose acquisition companies (SPAC) — has become trendy for tech companies in the current economic climate. A SPAC is essentially a shell company that acquires another company with the sole purpose of taking it public and has no other business.
A website called SPAC Insider publishes up-to-date statistics on SPACs taking companies public and reports that there have been 93 SPAC initial public offerings (IPOs) so far in 2020. Last year, there were only 59, and in 2019 there were only 43.
A number of major companies have gone the SPAC route, including Virgin Galactic Holdings, DraftKings, Hostess Brands and TGI Fridays, according to a Barron’s report on the rise of SPACs. Virgin Galactic Holdings was taken public by Social Capital’s first SPAC, according to Bloomberg.
For the acquired company, it’s a workaround for going public. Social Capital II is already publicly traded so Opendoor would avoid the often-arduous process of a direct listing. It would also likely avoid the initial pre-IPO scrutiny that dogged WeWork, which, like Opendoor, has raised significant capital through SoftBank’s Vision Fund.
Opendoor, like many other iBuyers, was forced by the pandemic to temporarily pause a significant portion of its business due to local regulations and safety concerns. During the pause, Opendoor was forced to lay off approximately 35 percent of its workforce in April.
Opendoor, the nation’s largest iBuyer by market share, has raised roughly $1.4 billion in a combination of debt and equity funding. As of March 2019, the company’s most recent $300 million funding round, the company was reportedly being valued at $3.8 billion.