Opendoor (OPEN +0.38%) has been one of the most interesting meme stock stories in recent history. After declining into penny stock territory this past summer and even going so far as to plan a reverse split, the stock has increased more than tenfold. In all, Opendoor's stock price is up by 463% from where it started 2025 as of this writing, and investors who got in at any point during the first half of the year are sitting on major profits.
The increase in Opendoor's stock wasn't because of any major developments within the business. In fact, the real estate market remains agonizingly slow, and iBuying is unprofitable. Instead, the meme stock rally was fueled by hedge fund manager Eric Jackson's lengthy series of social media posts spelling out his thesis on why Opendoor could be his next 100x investment idea.
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The short version is that Jackson believes Opendoor has massive potential to leverage its data to develop AI-driven real estate tools, and the fact that it is essentially the last major iBuyer standing gives it a big advantage as the real estate market normalizes. The meme stock rally jumped to another level when Opendoor ended up replacing its CEO with one whose vision is more aligned with what Jackson believes the company's future direction should be.
Not surprisingly, there are quite a few investors out there who have chosen to short Opendoor's stock. As of the latest data, Opendoor's short interest is more than 22% of its float (shares available for trading).
A move against short sellers
Opendoor's new CEO, Kaz Nejatian, recently made an interesting move that is specifically intended to complicate life for short sellers.
Here are the key details. In Opendoor's third-quarter earnings call, Nejatian revealed that every investor of record as of Nov. 18 will receive three warrants for every 30 shares they own. These warrants will have expiration dates in November 2026 and will have exercise prices of $9, $13, and $17.
NASDAQ: OPEN
Key Data Points
In the call, Nejatian specifically mentioned short sellers as a motivation for the move. "It gives me just a bit of joy that this will totally ruin the night of a few short sellers," he said.
There are two reasons why this move complicates the lives of Opendoor short sellers:
- First, Opendoor's stock jumped by more than 20% on this news, resulting in losses (on paper, at least) for anyone with a short position.
- Second, keep in mind that short selling involves borrowing shares that you don't own. Because of this, the short sellers will have to deliver the warrants to whatever lender they borrowed shares from. This could give them another reason to sell, on top of the recent stock price gains.
Will it be a smart move?
Whether or not this move ends up discouraging short selling in Opendoor stock remains to be seen. However, while the move is certainly being cheered by retail investors, it's important not to lose sight of two key points:
- First, if they end up being exercised, the warrants have the potential effect of diluting shareholders by as much as 10%.
- Second, while the company provided some future plans for scaling the platform and improving profitability, it remains an uphill battle. In fact, revenue, homes sold and purchased, and contribution profit all declined significantly year over year in Q3.
When CEOs focus on short sellers, instead of focusing on the actual business, it generally doesn't work out well for investors. As Epistrophy Capital Research's chief market strategist recently told Business Insider, "Historically, it has always been that when a CEO is obsessed with short sellers and talking about them publicly, there's something going wrong at that company."
