Opendoor Issues Warrants

During the Q3 earnings report yesterday, Opendoor CEO Kaz Nejatian announced that the company will be issuing warrant dividend to shareholders who own shares before Nov 18th. There will be a total of 3 warrants issued with strike prices of $9, $13, and $17. Shareholders will receive one of each warrant for every 30 shares they own.

Purpose of the Warrants

Opendoor's CEO stated that the goal of the warrant dividend is to ensure that if management succeeds in its turnaround efforts, shareholders share in the upside just as management does.

• Alignment: The warrants serve as a direct, structural way to align the interests of long-term shareholders with the company's performance-based incentive plan. 

• Flexibility: Shareholders have the choice to either sell the warrants immediately on the market or hold them and exercise them if the stock price reaches or exceeds the respective exercise price before expiration. 

These warrants have been met with mixed reactions with some shareholders loving the opportunity to buy the stock at a discount as they believe the stock will soar well above the warrant strike prices. Others see this as dilution disguised as warrants as well as a sign of a company struggling.

My thoughts:

I can understand both sides of the argument but given the fact that this new leadership just came in during Q3, this earnings report wasn’t much of a reflection on their leadership as is was on the former. Being an optimist, I see these warrants as a “reward/thank you” to early shareholders who believe in this company and new leadership and believe that they still have some big announcements in the near future. It’s been fun to follow this company as it’s being resurrected and I do hope they can turn it around but as we all know, real estate can be a finicky beast and at this time the market seems to be on the edge of collapse.