SoftBank-backed property group Opendoor on Tuesday is to go public in a deal with a blank-cheque company run by former Facebook executive Chamath Palihapitiya that values the business at $4.8bn.
Social Capital Hedosophia II, a so-called special purpose acquisition company set up by Mr Palihapitiya, will merge with Opendoor in a cash and stock deal. The blank-cheque vehicle raised $414m in a public offering in April.
Opendoor is a six-year old start-up that allows homeowners to buy and sell homes online, and Tuesday’s deal will provide it with a $1bn cash infusion, a sum that includes the funds raised in April. The company has also secured $600m from other backers including BlackRock, the Healthcare of Ontario Pension Plan, existing Opendoor investors and Mr Palihapitiya himself.
The former Facebook executive has been at the centre of the blank-cheque activity that has swept Wall Street over the past few years, merging his first vehicle with Richard Branson’s Virgin Galactic in 2019. Blank-cheque companies, also known as Spacs, have become a popular alternative to the traditional initial public offering for companies seeking to list their shares.
“We created the IPO 2.0 platform to identify and partner with iconic technology companies with proven management teams and assist in their transition to the public markets,” Mr Palihapitiya said in a statement on Tuesday. “Opendoor perfectly embodies this vision.”
Spacs have raised tens of billions of dollars this year, with high-profile names on Wall Street including hedge fund billionaire Bill Ackman and former Citigroup dealmaker Michael Klein turning to the structure. Paul Ryan, the former speaker of the House of Representatives, is also working on a blank-cheque company.
Opendoor generated revenues of $4.7bn in 2019. Last year the company raised $300m from a group of investors, including SoftBank and General Atlantic, at a $3.8bn valuation.
The business was founded in 2014 by Eric Wu and Ian Wong, and said it sold 18,000 homes last year. Opendoor has struggled during the coronavirus pandemic, even as the wider housing market rebounds, and in April cut its staff by a third.
Opendoor said it expected to have $1.5bn of cash on its balance sheet after the merger with Mr Palihapitiya’s blank-cheque company closes.