The pending investor class action lawsuit against Opendoor has been gaining more attention as the Tuesday, December 6, 2022 deadline looms for naming a lead plaintiff. The lawsuit was filed in October 2022 in the Federal District of Arizona, where Opendoor has maintained a strong market presence.

Opendoor and a group of individual defendants are being accused of securities fraud. Understanding Opendoor’s perilous situation can be instructive for other investors in iBuyer securities, as well as for homeowners who are contemplating using similar iBuyer services, especially during a real estate market downturn.

Here are the key facts and circumstances of the case to date.

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About Opendoor

Opendoor operates a digital platform to facilitate the efficient buying and selling of residential real estate in the United States. The company’s platform features a technology commonly known as “iBuying,” which is an algorithm-based process with the mission of making market-based offers to sellers for their homes, and then flipping those homes to buyers for a profit. These algorithms are commonly referred to as AVMsAutomated Valuation Models.

Traditional Home with Attic Windows

Opendoor was formerly known as Social Capital Hedosophia Holdings Corp. II (“SCH”), which operated as a special purpose acquisition company (SPAC), also referred to as a blank-check company. A SPAC has no specific business plan or purpose, and usually is involved in speculative investments, including mergers and acquisitions.

On September 15, 2020, Opendoor, then still operating as SCH, merged with Opendoor Labs,  to create an enterprise valuation of $4.8 billion. The newly formed Opendoor Technologies, Inc. later offered additional shares to the market via secondary public offerings in February 2021 and September 2021.

Opendoor Coming Soon Sign Illustration of House

Image courtesy of Opendoor.


 

Opendoor Timeline of Events

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December 1, 2022

Carrie Wheeler New CEO of Opendoor

Carrie Wheeler, New CEO of Opendoor

 

November 7, 2022

  • Mike DelPrete publishes his analysis on Opendoor’s Q3 2022 financial performance – One Year Later: Zillow Offers & Opendoor – opining that Zillow made the correct decision to shut down its iBuying business, Zillow Offers, whereas Opendoor has no choice but to continue on in a challenging and volatile market

November 2, 2022

Symbolic Downward Real Estate Market

October 7, 2022

September 22, 2022

September 19, 2022

August 1, 2022

July 22, 2022

April 15, 2022

Zoltan Pali Orum Residence in Bel Air Hills

Q1 2022

  • Opendoor’s stock price falls due to a softer-than-expected Q1 2022

March 10, 2022

February 24, 2022

November 2, 2021

February 8, 2021

  • Opendoor hits its all-time-high stock price of $34.59

December 21, 2020

  • Opendoor has its IPO (Initial Public Offering) with a share price of $31.47

September 15, 2020

  • Opendoor Technologies, Inc. is formed from the merger of Social Capital Hedosophia Holdings Corp. II and Opendoor Labs, Inc.

April 15, 2020

March 20, 2019

  • Opendoor raises $300M in venture capital, including Khosla Ventures, giving them a valuation of $3.8B

September 27, 2018

  • Opendoor raises $400M in venture capital from SoftBank Vision Fund

June 13, 2018

  • Opendoor raises a $325M in venture capital from General Atlantic

December 1, 2016

  • Opendoor raises a $210M in venture capital from Norwest Venture Partners

May 2014

  • Opendoor raises $9.95M in venture capital, led by Khosla Ventures

March 2014

  • Opendoor is launched by founders Eric Wu, Keith Rabois, JD Ross and Ian Wong

 

Details of the Class Action Investor Complaint Against Opendoor

The lawsuit on behalf of Opendoor investors commenced in the United States District Court for the District of Arizona, when filed in early October 2022. The lawsuit alleges violations of the Securities Act of 1933 and the Securities Exchange Act of 1934.

The lead plaintiff deadline is December 6, 2022 with the Class Period defined as December 21, 2020 through September 16, 2022. In other words, if you purchased Opendoor stock during this period you would be eligible to join and potentially lead this lawsuit.

The lawsuit seeks to recover losses on behalf of Opendoor investors who were adversely affected by alleged securities fraud during the defined Class Period.

The NASDAQ traded stock “OPEN” has plummeted from a high of $34.59 in February 2021 to a low of $1.85 at close of today’s publishing date of December 1, 2022.

Screenshot of Filed Class Action Complaint Against Opendoor

Opendoor Class Action Lawsuit Accusations

The complaint filed specifically alleges that, throughout the Class Period, the named defendants failed to disclose the following information to investors:

  1. The algorithm used by Opendoor to make purchase offers for homes could not accurately adjust to changing house prices across different market conditions and economic cycles
  2. As a result, Opendoor was at an increased risk of sustaining significant and repeated losses due to residential real estate pricing fluctuations
  3. Accordingly, the defendants overstated the purported benefits and competitive advantages of the algorithm; and
  4. As a result, the defendants’ positive statements about Opendoor’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis at all relevant times.

For more details on the complaint, see:

Large Empty Room with Reflective Floor


 

Defendants Named in the Opendoor Securities Fraud Lawsuit

Eric Wu Former CEO of Opendoor

Eric Wu, former CEO of Opendoor


 

Who Can Join the Class Action Lawsuit Against Opendoor?

To be a member of this lawsuit it is not necessary to take any action at this time.

Interested and qualified persons may retain counsel of their choice or take no action and remain an absent member of the class action.

If you wish to learn more about this class action, or if you have any questions concerning this announcement or your rights or interests, with respect to the pending class action lawsuit, there are several law firms actively seeking a lead plaintiff that you can contact:

 

Related Links on the Opendoor Lawsuit & Financial Performance

 

More Recommended Real Estate Reading

 

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