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Opendoor Is Playing A High-Stakes Game of Disruption: ‘Go Big Or Go Home’

With billions saved — and misplaced — Opendoor resides by the creed “go huge or go dwelling.” But even after a dreary This autumn, the iBuyer persists, which stands out as the greatest takeaway, Mike DelPrete writes solely for Intel.

This report is out there solely to subscribers of Inman Intel, a knowledge and analysis arm of Inman providing deep insights and market intelligence on the enterprise of residential actual property and proptech. Subscribe as we speak.

Final week Opendoor posted its This autumn monetary outcomes, revealing mega losses alongside early indicators of a doable turnaround.

Mike DelPrete

Why it issues: In 2022, Opendoor skilled a fully devastating take a look at of its enterprise mannequin – a worst case situation occasion – and survived. 

Behind the numbers: Opendoor posted a internet lack of $1.4 billion in 2022, on prime of already sizable historic losses.

  • Opendoor, and plenty of different venture-funded disruptors, are burning billions of {dollars} to develop new enterprise fashions – and the dearth of profitability simply doesn’t matter.
  • Essentially the most noteworthy reality is that Opendoor misplaced $1.4 billion in 2022 and remains to be working (albeit with a brand new CEO).

Money is king: Manufactured monetary metrics apart, Opendoor has loads of (however not limitless) money reserves.

  • Opendoor ended 2022 with $1.3 billion in money, money equivalents, and marketable securities – down from $2.2 billion in the beginning of the yr.
  • That’s a money burn of $934 million – huge losses, however a situation that Opendoor was in a position to climate with out elevating further capital (or going bankrupt).

Like many firms, Opendoor is racing to chop its working bills as rapidly as doable.

  • In November, it laid off about 18 p.c of workers, and only recently introduced it had diminished its run-rate bills by roughly $110 million.
  • Working bills are trending considerably decrease – a optimistic signal for a corporation trying to preserve money (be aware: gross sales, advertising and marketing and operations flex up and down based mostly on the variety of dwelling gross sales).

Mike DelPrete

The focus upon which the way forward for the enterprise rests is when Opendoor will flip the nook and cease promoting properties for a loss.

  • Properties that Opendoor bought in Q3 and This autumn are performing a lot better, with optimistic gross margins.
  • Sure, however: The primary properties to promote at all times have one of the best gross margins – over time, with value reductions, gross margins fall – as expertly illustrated by

Mike DelPrete

What to look at: Money, money, money – Opendoor’s future as a going concern rests on its means to fund loss-making operations.

  • With $1.3 billion within the financial institution and the worst behind it, the corporate seems to have loads of runway.

The underside line: Opendoor is enjoying a high-stakes sport of disruption. 

  • With billions within the financial institution and billions in losses, the corporate resides by the creed “go huge or go dwelling.”
  • After experiencing its single largest problem in a difficult historical past, Opendoor persists – which stands out as the greatest takeaway from a brutal yr.

Mike DelPrete is a strategic adviser and world knowledgeable in actual property tech, together with zavvie, an iBuyer provide aggregator. Join with him on LinkedIn.