Opendoor (OPEN) Stock Drops as Housing Market Stalls and Insider Sells 583K in Shares

TLDR

• Opendoor Technologies stock dropped 11% on Wednesday, extending a week-long decline that has seen shares fall nearly 30% since last Wednesday
• Redfin’s latest housing market report shows sales and new listings plateaued in October, with the market experiencing stagnant conditions
• A slow housing market forces Opendoor to hold inventory longer, increasing operating costs and hurting profitability
• Interim CFO Christina Schwartz sold 73,951 shares worth $583,473 through a mandatory sell-to-cover program on November 18
• The company continues operating at a loss while carrying billions in housing inventory and relying heavily on debt financing

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Opendoor Technologies closed Wednesday down 11% as concerns about a stagnant housing market rattled investors. The decline came even as broader markets gained ground, with the S&P 500 rising 0.3% and the Nasdaq climbing 0.5%.

Opendoor Technologies Inc., OPEN

The sell-off marks another rough day in a brutal week for the digital real estate company. Shares have plummeted nearly 30% since last Wednesday. The stock finished at $6.69, with the company’s market cap sitting at roughly $6.4 billion.

The catalyst for Wednesday’s drop was a sobering report from real estate brokerage Redfin. The data showed housing market activity hitting a wall in October.

Home sales and new listings barely moved from September levels. Redfin characterized the current environment as a plateau, citing high costs and economic uncertainty weighing on potential buyers and sellers.

How Opendoor Makes Money

The company buys homes directly from sellers, holds them as inventory, and then resells them. When the market is hot, homes move quickly. When it’s cold, Opendoor gets stuck holding the bag.

Right now, the company is sitting on billions of dollars worth of housing inventory. Every day those homes don’t sell, operating costs pile up. Maintenance, property taxes, and carrying costs eat into margins.

A frozen market means Opendoor can’t turn over inventory fast enough. Both revenue and profit margins take a hit. The company’s gross margin currently stands at just 8.01%.

Recent Insider Activity Raises Eyebrows

Adding to investor concerns, Interim CFO Christina Schwartz sold 73,951 shares on November 18. The transaction was worth $583,473.

The sale occurred through a mandatory sell-to-cover program set up by Opendoor’s compensation committee. These programs are typically used to cover taxes on stock compensation.

Still, insider sales during a period of steep stock declines rarely inspire confidence. Investors often view such moves as a red flag, even when they’re part of pre-planned programs.

The company remains unprofitable despite efforts to rescale operations. Management has outlined plans to materially change the business under new leadership following third-quarter results.

Citi recently raised its price target for Opendoor, citing these strategic shifts. The bank pointed to plans to adjust home purchase volumes and improve operational efficiency.

However, the fundamental challenges remain. Opendoor operates at a loss while relying heavily on debt financing. The company’s negative P/E ratio reflects ongoing financial struggles.

The stock has shown extreme volatility recently. Shares initially dropped on mixed options sentiment before a bullish flow emerged. That bounce proved short-lived as the broader housing concerns took hold.

Year-to-date, the stock is still up 393%. The wild swings reflect both the company’s high-risk profile and investors’ uncertainty about its path to profitability. The 52-week range stretches from $0.51 to $10.87.

Average trading volume sits at 251 million shares. Wednesday’s volume came in lighter at 120,000 shares as the stock fell throughout the session.

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