Opendoor Technologies (OPEN 2.17%) has been one of the most surprising stories in the stock market this year.
The struggling online home flipper caught fire in July in a meme stock rally that began when an argument that Opendoor could be the next Carvana attracted attention on social media sites like Reddit and X, and investors engineered a short squeeze.
The stock jumped as much as 2,000% from its bottom in late June to its peak in September, as the rally culminated with Opendoor naming a new CEO, Kaz Nejatian, the former COO of Shopify, and two of Opendoor's cofounders rejoined the board.
Since then, Opendoor stock has pulled back from its peak, but Nejatian has introduced a unique idea to give the stock a boost.
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Is Opendoor more than a meme stock?
Alongside Opendoor's third-quarter earnings report, Nejatian announced a special warrant, an option issued by the company, giving shareholders of record on Nov. 18 three warrants for every 30 shares of the stock they own.
The warrants are from three exercise prices, at $9, $13, and $17, and expire in a year, giving investors a unique way to get upside potential. Additionally, the warrants are tradable, meaning investors can profit from them even if they don't exercise them.
NASDAQ: OPEN
Key Data Points
On the earnings call, Nejatian called out short sellers, saying he hoped the move ruined their night.
The warrants seemed to help spark a rally in the stock in the days after the earnings report, though the stock has since pulled back, which may be related to the broader market pullback.
Can Opendoor turn it around?
The warrant offer gave investors an incentive to buy the stock ahead of the record date, but it also seems to send a mixed message, coming at the same time that Nejatian is trying to revitalize the company.
He introduced a turnaround plan that included scaling acquisitions, improving unit economics, and building operating leverage. He also announced a new goal to reach adjusted net income breakeven by the end of next year.
However, the housing market continues to be stubborn, and Opendoor scaled back its business in the third quarter and expects the same in the fourth quarter. Revenue fell 34% in the quarter to $915 million, and its margins weakened, though the CEO noted that the results in the second half are based on decisions made before his tenure.
Overall, Nejatian clearly isn't afraid to shake things up, including with the unusual warrants move, and he's aiming for a significant turnaround over the next year. However, the company may need help from the macro environment in order to deliver a real turnaround.
