Key Points
Opendoor went from a penny stock to a meme stock in a very short period of time.
It's also a possible AI stock, to add another level of investor enthusiasm.
Opendoor's stock price has already started to cool and the hard work has only just begun.
10 stocks we like better than Opendoor Technologies ›
Just a short while ago, Opendoor (NASDAQ: OPEN) was on the verge of being delisted by the Nasdaq stock exchange. It was planning on conducting a reverse stock split to avoid that fate. And then everything changed, including Kaz Nejatian joining the company as the new CEO.
But have things really changed enough yet?
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A major decline and a big uptick for Opendoor's stock
If you look at the entire price history of Opendoor's stock, it is currently down by around 75% from its all-time high. That all-time high came shortly after it went public, via a merger with a special purpose acquisition corporation (SPAC) in 2020. Back then, SPACs, which are companies that raise money so they can go out and buy a business, were all the rage and such deals were viewed very favorably by investors.
Then the reality set in that Opendoor was a money-losing startup. The stock started its long decline, eventually losing almost all of its value as it fell into penny stock land. The price remained so low for so long that the Nasdaq exchange threatened to delist Opendoor's stock. That's a terrible thing for a business, as it makes it much harder to access the capital markets for cash. Opendoor did what many companies do in such a situation -- it planned to enact a reverse stock split. Reverse stock splits are usually not a good sign for a business.
And that was about the time that an activist investor started to really crank up the heat on Opendoor. The old CEO departed and a search for a new CEO began, with the stock starting to rise as the process unfolded. When Kaz Nejatian from Shopify was announced as the new CEO of Opendoor, the stock jumped even higher. From its all-time high, Opendoor is now down 75% or so. And over the past three months, the stock is up more than 1,300%.
The problem with Opendoor's rally
There's one small wrinkle in this story that investors shouldn't ignore. Nothing material has changed within Opendoor's business. It is still a money-losing startup. And that's important because it is attempting to create a business around home flipping, which is something that is usually done by small, local investors. It is, basically, an unproven business. Wall Street is treating the stock as if the new CEO will instantly move the income statement from red to black, which seems like an unlikely outcome.
[SRC] https://finance.yahoo.com/news/opendoor-ceo-kaz-nejatian-help-091500168.html
