Real estate iBuying company Opendoor Technologies (OPEN 3.23%) has been having an exciting year.
Meme stock status, a CEO transition, and the return of two company co-founders would have been interesting enough, but the stock's performance -- up more than 1,100% in the last six months alone -- has been jaw-dropping.
The company's new CEO has wasted no time in setting his sights on the scourge of meme stocks everywhere: short sellers. He's announced a radical plan to -- in his words -- "ruin the night" for them. Here's what investors -- with short or long positions -- need to know.
Image source: Getty Images.
A whirlwind four months
Opendoor's stock had been a boring snoozefest for the first six months of 2025, with shares slowly but steadily declining from about $1.60/share on the first of the year to just $0.53/share on June 30. Probably the most exciting news came when the stock price fell below $0.75/share in May, and short sellers -- thrilled by the prospect of a potential delisting -- piled into the stock.
In the second half of the year, though, things suddenly got incredibly interesting for Opendoor. In July, it achieved meme-stock status, sparking massive share price jumps -- and massive volatility -- ever since. In August, embattled CEO Carrie Wheeler announced her resignation, leading to the company hiring Shopify COO Kaz Nejatian as the new CEO in September. Also that month, co-founders Eric Wu -- who had been CEO until the end of 2023 -- and Keith Rabois returned to the board of directors.
NASDAQ: OPEN
Key Data Points
This month, when the company reported Q3 earnings that were roughly in line with Wall Street's expectations: a slight revenue beat of $915 million vs. an expected $850 million and a slight earnings miss with an $0.08/share net loss vs. an anticipated net loss of $0.07/share.
But despite the finances roughly meeting expectations, nobody expected what Nejatian announced he had in store for short sellers.
What Opendoor has in store
CEO Kaz Nejatian announced that investors who held at least 30 Opendoor shares on Nov. 18 would receive tradable warrants, which are basically coupons good for a free share for a specific price. The warrants would be distributed in sets of three warrants (one Series K, one Series A, and one Series Z) for every 30 shares owned. The warrants would have exercise prices of $9 (Series K), $13 (Series A), and $17 (Series Z), and would expire in November 2026.
And no, it's not a coincidence that those warrant series letters happen to spell out the first name of the CEO.
So for the next year, anyone with a Series K warrant can trade that warrant and $9 for a share of Opendoor stock. This won't matter if the share price is below $9 -- like the current $8.78/share price -- because it would be cheaper to just buy the stock at market value. But of course, if the price rises above $9 (or $13, or $17), those warrants become more valuable. Unsurprisingly, after the announcement, Opendoor's stock -- which had been trading below $7/share -- rapidly rose to around $9/share.
How it hurts shorts
This announcement was designed to mess with short sellers in two ways.
First, by offering shareholders an advantage if the price rises to at least $9/share, Opendoor is encouraging them to buy shares before the warrants are awarded on Nov. 18, and giving them a reason to bid shares up to above that level. Because $9/share is near the stock's three-year high, that could force short sellers to have to pay into their margin accounts to hold onto their shares: a classic "short squeeze."
Additionally, because the warrants belong to the owners of the shares -- and not to short sellers, who borrow shares they don't own -- some short sellers may be forced to deal with the hassle of ensuring delivery of warrants to the shareholders from whom their shares are borrowed. Rather than deal with that, some short sellers may just decide to throw in the towel.
With about 25% of its float sold short, there's no denying that Opendoor is a heavily shorted company, and that those shorts are likely weighing heavily on the share price. But trolling short sellers with warrants that spell out your name -- while fun and good for getting attention from financial columnists -- is a short-term solution at best. Smart long-term investors will want to avoid Opendoor until they see evidence of a sustainable turnaround at the company.
