For a special purpose acquisition company (SPAC) with an odd name but interesting profit potential, check out Social Capital Hedosophia II (NYSE:IPOB). Don’t be deterred by the title, though, as I’ll be more than happy to break down IPOB stock for you.
You see, not every company has the wherewithal to go public through a traditional initial public offering or IPO. That’s a shame because sometimes a business is based on a great idea and deserves to go public.
That’s where shell companies like Social Capital Hedosophia II come in. The only real purpose of this company right now is to merge with Opendoor and then have in IPO so that people like you and I can own a stake in that company.
But what is Opendoor all about and whether it’s a good company to invest in is a different question. Are we looking at just another hyped-up SPAC here, or a truly lucrative business? Stay with me as I answer these and other burning questions.
What’s Interesting About IPOB Stock
This has been a year of many SPAC’s. I would even dare to call this summer the Summer of the SPAC because there were so many of them (I’ll admit that I brazenly stole that phrase from InvestorPlace contributor Sarah Smith).
As reported by SPAC Analytics, there have been 138 SPAC IPO’s this year so far (and we’re certainly not finished yet), compared to just 59 of them in 2019. The most buzz-worthy ones were in the electric vehicle market. However, the reverse merger between shell company Social Capital Hedosophia II and start-up Opendoor is different.
This unique business combination, enacted on Sept. 15, pinpoints Opendoor’s enterprise value at $4.8 billion, so this is truly a unicorn (since it’s worth at least $1 billion). Yet, it’s not the dollar amount that’s special about this particular SPAC.
Actually, it’s Opendoor’s specialty that sets this SPAC apart from the slew of electric vehicle and other SPAC’s. To be more specific, Opendoor is attempting to reinvent real estate as we know it.
In case your head isn’t already filled with new terminology for 2020 (“new normal,” “pandemic fatigue,” etc.), now it looks like we’re all going to have to learn about something called “iBuying.”
At least, that’s what digital real estate purchase and sale facilitator Opendoor calls it. Evidently, iBuying involves prospective home buyers going online “to request and accept an offer, select their preferred closing date, sign and close.”
Opendoor further claims that its iBuying process “collapses the entire house selling process into a few simple steps and removes up to 100 days of hassle and uncertainty.”
If you’re ever been through the traditional home-buying process yourself, then you should know that this is no exaggeration. The Opendoor app simplified the process by enabling shoppers to virtually tour and visit homes, get financing and make an offer online.
Real Estate in the Covid Era
According to the Securities and Exchange Commission filing related to the SPAC in question, Opendoor currently operates in 21 U.S. markets. That’s a pretty impressive stat, and here are some others:
- Over 80,000 customers served
- More than $10 billion worth of homes sold
- Upwards of 18,000 homes sold last year
- $4.7 billion in revenues generated from homes sold in 2019
Are you starting to get interested yet? In the age of Covid-19, more and more transactions are shifting online. Judging by those numbers, shoppers are willing to buy and sell big-ticket items online nowadays, including homes.
And keep in mind that some of the stats listed above reflect pre-pandemic numbers. I can only imagine that 2020’s figures will be even bigger and better. Clearly, app-facilitated real estate transactions are a bona fide market with tremendous revenue generation potential.
The Bottom Line
Don’t get distracted by the weird name Social Capital Hedosophia II. It’s just a blank-check company that’s facilitating a highly promising start-up.
Instead, focus on the earnings potential of Opendoor. We’re living in a time when many transactions are app-driven. Therefore, as a stake in the post-pandemic future of real estate, a position in IPOB stock makes perfect sense.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.