IPOB stock surged 18% higher in pre-market trading on news it is merging with Opendoor.
Opendoor Labs Inc., the pioneer and market leader in iBuying, has entered into a definitive business combination agreement with Social Capital Hedosophia Holdings Corp. II (NYSE: IPOB) (“SCH”), a publicly traded special purpose acquisition company, to bring public a leading digital platform for residential real estate.
Founded in 2014, Opendoor has reinvented the real estate transaction, offering an on-demand, digital experience to buy and sell a home. Opendoor enables homeowners to sell and buy online in a few taps of a button, providing greater simplicity, certainty and convenience than ever before. Since its founding, the Company has served over 80,000 customers and sold over $10 billion of homes. In 2019, the company sold more than 18,000 homes, generating $4.7 billion in revenue.
Residential real estate remains the largest, undisrupted market in the U.S. with $1.6 trillion in annual home sales and less than one percent online penetration. For consumers, the current process of buying or selling a home is complex, uncertain, time consuming and offline. Opendoor, as the innovator and market leader in iBuying, streamlines the transaction and brings the end-to-end experience online. Homeowners can go online to request and accept an offer, select their preferred closing date, sign and close. This collapses the entire house selling process into a few simple steps and removes up to 100 days of hassle and uncertainty. Home buyers can download the Opendoor app, tour and visit homes instantly with self-tours, get financing at competitive rates, and make an offer, all with just a mobile device. Collectively, Opendoor has built a simple, elegant, on-demand buying and selling experience.
The shift from offline to online consumption continues to accelerate, driving increased customer awareness, adoption and growth. Consumers are prioritizing safety, demanding digital experiences, moving out of dense areas and searching for more space to work from home. These trends create significant tailwinds for Opendoor, whose mission is to empower people with the freedom to move.
Opendoor currently operates in 21 markets across the U.S., including cities such as Phoenix, Dallas-Fort Worth, Raleigh-Durham, Atlanta and Orlando. Given the demand for a digital way to buy and sell a home and the much needed digitization of services around the home, Opendoor plans to grow market share in existing markets, expand to new markets and launch new products that make real estate transactions even more seamless.
The Company’s management team, led by Founder and CEO Eric Wu, will continue to lead Opendoor. SCH’s Director, Adam Bain (former Chief Operating Officer of Twitter), will join the merged company’s Board of Directors upon completion of the transaction.
Eric Wu, Founder and CEO of Opendoor, said:
“We founded Opendoor to make it simple and instant to buy and sell a home, to delight customers and make their lives less stressful, and to build an iconic, once in a generation company. This is one of many milestones towards our mission and will help us accelerate the path towards building the digital one-stop-shop to move. I am grateful for the continued support from my teammates and shareholders and most thankful for the tens of thousands – and I hope soon to be hundreds of thousands – of families, couples and individuals that trust Opendoor with the largest financial decision of their life. We are energized by the opportunity to make our online, streamlined experience available to millions of homeowners every day.”
Chamath Palihapitiya, Founder and CEO of Social Capital Hedosophia II, said:
“We created the IPO 2.0 platform to identify and partner with iconic technology companies with proven management teams and assist in their transition to the public markets. Opendoor perfectly embodies this vision. The Company is transforming the $1.6 trillion residential real estate market by combining a superior user experience, streamlined operations and machine learning to create a seamless digital experience. We are excited to work with Eric and the supremely talented Opendoor team to unlock home ownership for millions of Americans.”
On September 15, 2020, SCH (NYSE: IPOB.U) entered into a definitive agreement to combine with Opendoor through a combination of stock and cash financing. The business combination values Opendoor at an enterprise value of $4.8 billion, representing 1.0x 2019 revenue.
The transaction is expected to deliver up to $1.0 billion of gross proceeds, including the contribution of up to $414 million of cash held in SCH’s trust account from its initial public offering in April 2020. The transaction is further supported by a $600 million PIPE at $10.00 per share, with $200 million from entities affiliated with SCH, including $100 million from Chamath Palihapitiya, Founder and CEO of SCH, $58 million from Hedosophia, and the remainder from existing Opendoor shareholders, Access Industries and Lennar, along with Opendoor management. New investors to Opendoor via additional PIPE contributions include funds and accounts managed by BlackRock and Healthcare of Ontario Pension Plan (HOOPP). Existing Opendoor shareholders have agreed to roll 100 percent of their equity into the new company. Upon completion of the transaction, Opendoor expects to have up to $1.5 billion in cash on its balance sheet to fund operations and support new and existing growth initiatives. All references to cash on the balance sheet, available cash from the trust account and retained transaction proceeds are subject to any redemptions by the public shareholders of SCH and payment of transaction expenses.
The transaction, which has been unanimously approved by the Boards of Directors of Opendoor and SCH, is subject to approval by SCH’s shareholders and other customary closing conditions.