Trade the Digital Real Estate Experience with Social Capital Hedosophia

Yet, through a reverse merger with special purpose acquisition company (SPAC) Social Capital Hedosophia Holdings II (NYSE:IPOB), traders can now take a stake in Opendoor through a long position in IPOB stock.

cardboard miniature house on table back-lit by sunlight through a window for IPOB stock story
Source: Shutterstock

Real estate, reinvented. That’s what real estate technology services firm Opendoor envisions for the future, but it wasn’t tradable until recently.

I suppose you could call it a back-door way of bringing Opendoor to the trading community. (Full disclosure: I completely stole that phrasing from InvestorPlace contributor Josh Enomoto.)

In reality, Social Capital Hedosophia Holdings II’s only real purpose was to merge with Opendoor so that the initial public offering (IPO) could transpire.

So, when thinking about IPOB stock, don’t focus on the shell company with the long, funny name. Instead, consider Opendoor’s blue-sky possibilities as digitally delivered real-estate services could be a breakout market in 2021.

A Closer Look at IPOB Stock

Opendoor going public wasn’t announced until Sept. 15. As a result, we don’t have a whole lot of price history for IPOB stock.

What we can observe during its brief history are some wild price moves. It was a meteoric rise as IPOB rocketed from $15 and change in mid-September to a 52-week high of exactly $27 in mid-October.

Unfortunately, IPOB wasn’t meant to stay at the $27 level. I’ve warned folks about buying stocks after a vertical move, and IPOB presents a harsh lesson for price chasers.

Thus, by mid-November IPOB had declined to the $19 area. It’s been a roller-coaster ride so far, and there could be more volatility ahead. That’s because the market is still trying to figure out an appropriate price range for IPOB, a process which might take a while.

Off to a Good Start

At the very least, we can say with confidence that Opendoor started off with a strong cash position during its merger with Social Capital Hedosophia Holdings II.

Here are some highlights revealed during the SPAC transaction:

  • Opendoor estimated at an enterprise value of $4.8 billion
  • Up to $1.0 billion in cash proceeds to be generated from the SPAC transaction
  • A $200 million commitment from insiders
  • Big-money institutional investors getting involved, including funds and accounts managed by BlackRock (NYSE:BLK) and the Healthcare of Ontario Pension Plan (HOOPP)

That’s a massive amount of capital, plus a vote of confidence from BlackRock, a major financial institution.

It’s an auspicious beginning as Opendoor goes public on Wall Street. But why would these big-time investors pour so much money into Opendoor?

Service of First Resort

If Enomoto will forgive me, I’m going to borrow another phrase here. He projected that Opendoor “has a very real shot of being the service of first resort for real estate transactions.”

That’s what I was trying to get at when I called Opendoor, and hence IPOB stock, a blue-sky opportunity. By digitizing the buying and selling of real estate, Opendoor is entering into a niche market with tremendous growth potential.

Opendoor describes its business model as reinventing the real estate transaction by “offering an on-demand, digital experience to buy and sell a home.” Moreover, Opendoor “enables homeowners to sell and buy online in a few taps of a button, providing greater simplicity, certainty and convenience than ever before.”

Amazingly, there aren’t a ton of publicly traded companies competing in this space. You’d think there would be in the age of the novel coronavirus pandemic. Yet somehow, Opendoor remains an early mover in a largely untapped niche market.

The Bottom Line

If you expect the digitized real estate market to grow in 2021, then IPOB stock is a simple way to take a position.

The field might become more crowded later on, but for the time being, Opendoor remains the service (and the investment) of first resort.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.


Article printed from InvestorPlace Media, https://investorplace.com/2020/11/trade-the-digital-real-estate-experience-with-ipob-stock/.

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