Opendoor Technologies (OPEN 5.14%) may have delivered underwhelming results when it reported earnings last week, but shares in the real estate iBuyer have surged in price nevertheless. At first, it may be easy to attribute this latest price action to "meme stock mania."
Over the past few months, Opendoor has become one of the most popular meme stocks. Yet while the stock is indeed experiencing another wave of "meme mania," there may be much substance to what's driving it.
Right after earnings, Opendoor made an announcement that investors perceived to be a possible trigger for a short squeeze. While it's possible that a further run-up occurs, these corporate actions could end up nightmarish, not for the short side of the trade, but for shareholders.
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Opendoor and its delayed post-earnings surge
On Nov. 6, Opendoor released earnings for the quarter ending Sept. 30, 2025. The company beat on revenue, but actual numbers for adjusted EBITDA and losses per share came in worse than sell-side analyst forecasts.
| Metric | Q3 2025 Estimates | Q3 2025 Actuals | Difference |
|---|---|---|---|
| Revenue | $850 million | $915 million | $75 million |
| Adjusted EBITDA | ($24.4 million) | ($33 million) | ($8.6 million) |
| Losses per share | ($0.07) | ($0.08) | ($0.01) |
Opendoor's turnaround remains a work in progress. The company is using AI to enhance its business, improving the unit economics and in turn bringing Opendoor to the point of steady profitability. Still, there's a second ingredient likely necessary for this turning to take shape: a rebound in the housing market. Interest rates have come down, but housing demand is once again slowing down as well.
It's unclear whether Opendoor will live up to goal of hitting break-even profitability next year. Still, while the stock initially dropped on earnings day, it wasn't long before shares resumed their higher surge. For this delayed post-earnings surge, perhaps the credit should go to Kaz Nejatian, the current CEO of Opendoor, and former COO of Shopify.
NASDAQ: OPEN
Key Data Points
On the post-earnings conference call, Nejatian discussed a plan that he believed could "ruin the night" of short sellers. Meme mania notwithstanding, short interest remains high, at nearly 22%.
Why a short seller's "nightmare" paves the way for more gains
So, what was this "plan," and why did it elicit such a position reaction from investors? The big announcement was as follows: to shareholders of record as of Nov. 6, 2025 at 5 p.m., Opendoor plans to distribute three separate stock warrants, for each 30 shares held.
These warrants enable existing Opendoor investors the ability to acquire additional shares, at strike prices of $9, $13, and $17 per share. Why did Nejatian say these warrants could prove nightmarish for the shorts?
Since short sellers have to borrow the shares they have sold short, they are also on the hook for any dividends or distributions from these borrowed shares. Buying up these warrants could be costly, especially as investors continue to bid up the underlying Opendoor shares.
Some of these short sellers could also decide to fully exit their positions. This would also likely put a further squeeze on the stock.
Still, tread carefully
Based on the headlines, it may seem as if Opendoor's management has crafted a seamless way to drive up the stock price. However, it may not be that easy. Opendoor is also quietly redeeming outstanding convertible bonds via an exchange offer. By increasing the share count, this little-discussed action is going to cause share dilution. Further dilution may occur, if shares climb above the various strike price of the warrants and investors exercise them.
Yes, it may be a positive for Opendoor to reduce debt and increase its cash position, but what happens if all this cash just goes to covering further operating losses? If fiscal performance fails to improve, but its outstanding share count keeps rising, this could place considerable pressure on the stock. This is very similar to what happened with former "meme king" AMC Entertainment.
With this news, instead of chasing the latest Opendoor Technologies rally, you may want to tread carefully, or even skip it entirely.
