Back in September, Chamath Palihapitiya brought an exciting company to the public through special purpose acquisition company (SPAC) Social Capital Hedosophia II, which traded as IPOB stock. That company merged with OpenDoor Technologies (NASDAQ:OPEN), and thus OPEN stock was born.
Palihapitiya’s claim was that OpenDoor, which is an online marketplace for buying and selling houses, would be his “next 10x idea.” Admittedly, Palihapitiya’s second SPAC stock has done quite well since the merger target was announced.
Still, investors have every right to question whether that magnitude of growth is achievable. Are there catalysts to propel the OPEN stock price that far?
No guarantees can be made here, but OpenDoor is a business with highly promising prospects. A little bit of faith and a whole lot of patience could, indeed, pay off handsomely for OPEN stock holders in the long run.
A Closer Look at OPEN Stock
Social Capital Hedosophia II shareholders voted to approve the merger with OpenDoor on Dec. 17., and OPEN stock finally commenced trading on the Nasdaq Exchange on Dec. 21.
Perhaps it wasn’t a coincidence that Dec. 21 also marked the 52-week high of OPEN stock, at $32.39. After all, there was a great deal of anticipation surrounding the stock’s debut.
By the close of the market on Feb. 5, OPEN stock had declined to $26.60. So, OPEN stock holders suffered losses unless they had already owned the shares back when they were trading as IPOB stock.
It’s really too soon to declare OPEN stock a winner or a loser. More important than the stock’s price action, at this point, is whether OpenDoor represents a company with growth catalysts.
If so, then Palihapitiya’s 10-bagger prediction might actually come true.
SPAC-Man Fever
Let’s face it: investors just can’t seem to get enough of Palihapitiya. The man has been called the SPAC king, and his flair for promoting companies might be OPEN stock’s most important catalyst.
Venture capitalist Bill Gurley concisely summed up Palihapitiya’s reputation as a consummate pitchman. “Chamath, he’s figured out the process for crushing it as a SPAC sponsor and I think a lot of the others are just sitting still and don’t know what he knows,” Gurley asserted.
Palihapitiya’s track record of SPAC success stories includes the pioneering space tourism company Virgin Galactic (NYSE:SPCE). And, it’s fair to say that SPCE stock holders have earned outstanding returns.
Indeed, SPCE stock has rocketed from a 52-week low of $9.06 to an astounding 52-week high of $62.80. That’s not quite a 10x return on investment yet, but it might get there sooner rather than later.
A Start-to-Finish Platform
I’m not trying to imply that every one of Palihapitiya’s six-pack of SPAC stocks will go to the moon like SPCE stock has done.
Yet, OPEN stock is particularly promising as an increasingly digitized world could benefit from an online platform for residential real estate.
One obvious catalyst here is the Covid-19 pandemic. OpenDoor remains eminently relevant as health concerns have created a demand for contactless service in the real estate market.
OpenDoor’s fully online platform enables sellers to list their homes and potentially get instant offers. Moreover, they can avoid the traditional open-house showing.
There’s an additional growth driver in the fact that OpenDoor facilitates not only the sale of a home, but also a range of additional services. These can include financing, title and escrow, insurance, home maintenance, warranties, upgrades and even moving services.
With all of those services, OpenDoor could practically guide home sellers through the entire process from start to finish. That’s likely to disrupt the conventional real-estate market, but I imagine that Palihapitiya wouldn’t have it any other way.
The Bottom Line
Palihapitiya is a pitchman, first and foremost, so there might be some exaggeration in his claim that OpenDoor will be a “10x idea.”
This doesn’t mean, however, that OPEN stock isn’t worth your investment capital. Even a 2x or 3x idea – which OpenDoor very well could be – deserves our attention.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
