Report: One of Social Capital’s newest blank-check companies is looking to reverse merge with Opendoor
Some people may have slowed down in 2020, amid a pandemic that has shut down much of the world. Not Chamath Palihapitiya .
According to a new report in Bloomberg, Opendoor, the San Francisco-based company that aims to help people buy and sell homes with the “push of a button,” is in advanced talks to go public through a merger with Social Capital Hedosophia Holdings Corp. II.
The outlet says the blank-check company, which raised $360 million in April and is led by Palihapitiya, is “discussing raising fresh equity to help fund the transaction with prospective investors” and that the combined company would be valued at around $5 billion in the deal.
It adds that nothing has been finalized and that the deal could still fall apart.
We reached out to both Opendoor CEO Eric Wu and to Palihapitiya for comment. An Opendoor spokeswoman said the company has no comment; we have yet to hear back from Palihapitiya but will update this story if we do.
Assuming the deal is fairly far along, and at a $5 billion valuation, one could see the appeal for Opendoor, which was last valued by private investors at $3.8 billion and that like many other venture-backed outfits has had a topsy turvy 2020. Indeed, in April, it laid off 600 employees, or 35% of workforce at the time, citing the “unforeseen impact on public health, the U.S. economy, and housing,” prompted by COVID-19.
In recent months, however, home sales around the country have been brisk, spurred by low mortgage rates and a heightened appetite for more space, particularly outside of crowded cities.
According to a late-August report by the National Association of Realtors, U.S. home sales rose an unprecedented 24.7% in July, up 8.7% from the same time last year. Home sales rose 20.7% in June, too (which was a record at the time).
The equation makes sense for Palihapitiya, too. For starters, Opendoor is a brand that many retail investors already know and can easily understand and would likely continue to support as a public company. In fact, its consumer appeal isn’t so unlike that of the space tourism company Virgin Galactic, which Palihapitiya’s first blank-check company ultimately went on to acquire after it raised $600 million in 2017.
The combined outfit went public last October with a $2.3 billion market capitalization; its market cap is now above $4 billion.
As for what Palihapitiya might do with a third special purpose acquisition vehicle that he also whipped together in April — having raised $720 million, it’s the biggest SPAC of the three — stay tuned. The company has said it will use its IPO proceeds to buy a tech company that’s primarily outside of the United States.
In the meantime, Palihapitiya isn’t focused on his own SPACs alone. He’s also investing in Desktop Metal, a Burlington, Ma., company set to go public via a separate SPAC.
Desktop disclosed plans last week to list on the New York Stock Exchange by merging with Trine Acquisition Corp, a blank check company that raised $261 million in March of last year. Palihapitiya had helped lead a $275 million PIPE (for private investment in a public equity) investment to finance the deal.