Opendoor to go public in Social Capital merger in US$4.8b deal

Screengrab from the Opendoor Labs Inc internet portal
Screengrab from the Opendoor Labs Inc internet portal

NEW YORK, Sept 16 — Opendoor Labs Inc, the home-selling platform backed by SoftBank Group, said yesterday it has agreed to go public through a merger with a blank-check company led by venture investor Chamath Palihapitiya in a deal that will value the company at US$4.8 billion (RM19.9 billion).

Opendoor buys properties from sellers and makes repairs, at a service charge, then lists them for sale. As part of the deal with Social Capital Hedosophia Holdings Corp II, Opendoor will get US$1 billion cash, including US$600 million from Palihapitiya and other investors such as BlackRock and Healthcare of Ontario Pension Plan.

OpenDoor was hit hard by the pandemic this year, and laid off 35 per cent of its workforce in April. As the home resale business started to recover, it looked for capital to fuel expansion and opted to go public through merging with Social Capital over a traditional initial public offering.

The San Francisco-based firm wanted to access the public market faster and with more certainty, worried the US presidential election and the second wave of coronavirus could cast shadow on its growth, according to a person familiar with the discussions. In a SPAC deal, the funds raised by the company are committed upfront.

The merger is expected to close to by year end. Social Capital II shares jumped almost 35 per cent yesterday.

A blank-check company, also known as a special purpose acquisition company (SPAC), uses capital raised through an initial public offering to buy a private company, usually within two years. The deal then takes the private company public.

SPACs emerged this year as an alternative route to the public market over a traditional IPO, led in part by successful deals for space tourism company Virgin Galactic Holdings Inc and fantasy sports and gambling company DraftKings Inc .

Social Capital, the blank-check firm backed by Virgin Galactic Chairman Palihapitiya, raised US$360 million when it went public in April.

In 2018, SoftBank's Vision Fund invested US$400 million in Opendoor, which was founded in 2014. — Reuters