The investor behind Opendoor’s 190% run nearly shut down his fund
- Opendoor shares soared 189% this week, by far their best weekly performance since the company’s stock market debut in late 2020 through a SPAC.
- The rally has been driven by social media posts from hedge fund manager Eric Jackson, who suffered along with Opendoor during the market downturn of 2022.
- Jackson’s campaign is to get Opendoor to $82 a share. Even after this week’s surge, it’s trading at $2.25.
On June 6, online real estate service Opendoor was so desperate to get its beaten-down stock price back over $1 and stay listed on the Nasdaq that management proposed a reverse split, potentially lifting the price of each share by as much as 50 times.
The stock inched its way up over the next five weeks.
Then Eric Jackson started cheerleading.
Jackson, a hedge fund manager who was bullish on Opendoor years earlier when the company appeared to be thriving and was worth roughly $20 billion, wrote on X on Monday that his firm, EMJ Capital, was back in the stock.
″@EMJCapital has taken a position in $OPEN — and we believe it could be a 100-bagger over the next few years,” Jackson wrote. He added later in the thread that the stock could get to $82.
It’s a long, long way from that mark.
Opendoor shares soared 189% this week, by far their best weekly performance since the company’s public market debut in late 2020. The stock closed on Friday at $2.25. Its highest-volume trading days on record were Wednesday, Thursday and Friday of this week.
Jackson said in an interview on Thursday that the bulk of his firm’s Opendoor purchases came when the stock was in the 70s and 80s, meaning cents, and he’s bought options as well for his portfolio.
Nothing has fundamentally improved for the company since Jackson’s purchases. Opendoor remains a cash-burning, low-margin business with meager near-term growth prospects.
What has changed dramatically is Jackson’s online influence and the size of his following. The more he posts, the higher the stock goes.
“There’s a real hunger for buying the next big thing,” Jackson told CNBC, adding that investors like to find the “downtrodden.”
It’s something Jackson’s firm, based in Toronto, has in common with Opendoor.
When Opendoor went public through a special
purpose acquisition company in 2020, it was riding a SPAC wave and
broader gains driven by low interest rates and Covid-era market euphoria.
Investors pumped money into the riskiest assets, lifting money-losing tech
upstarts to astronomical valuations.
Opendoor’s business involved using technology to buy and
sell homes, pocketing the gains. Zillow tried
and failed to
compete.
Opendoor shares peaked at over $39 in Feb. 2021 for a market
cap just above $22.5 billion. But by the end of that year, the shares were
trading below $15, before collapsing 92% in 2022 to end the year at $1.16.
Rising interest rates hammered the whole tech sector,
hitting Opendoor particularly hard as increased borrowing costs reduced demand
for homes.
Jackson, similarly, had a miserable 2022, coinciding with
the worst year for the Nasdaq since 2008. Jackson said his key client withdrew
its money at the end of the year, and “I’ve been small ever since.”
‘Epic comeback’
While his assets under management remain minimal, Jackson’s
reputation for getting in early to a rebound story was burnished by the
performance of Carvana.
The automotive e-commerce platform lost 98% of its value in
2022 as investors weighed the likelihood of bankruptcy. In the middle of that
year, with Carvana still far from bottoming out, Jackson expressed his
bullishness. He told
CNBC that April that he liked the stock, and then promoted its
recovery on a podcast in June. He also said he liked Opendoor at the
time.
Investors willing to stomach further losses in 2022 were
rewarded with a 1,000% gain in 2023, and a lot more upside from there. The
stock closed on Friday at $347.52, up from a low of $3.72 in Dec. 2022, and
almost triple its price at the time of Jackson’s appearance on CNBC in April of
that year.
After Carvana’s 2022 slide, “then obviously began an epic
comeback,” Jackson said. Opendoor, meanwhile, “continued to roll down the
mountain,” he said.
Jackson said that the fallout of 2022 led him to pursue a
different method of stockpicking. He started hiring a small team of developers,
which is now four people, to build out artificial intelligence models.
The firm has experimented with several models —some have worked and some
haven’t — but he said the focus now is using what he’s learned from Carvana to
find “100x” opportunities.
In addition to Opendoor, Jackson has been promoting IREN, a provider of power for
bitcoin mining and AI workloads, and Cipher Mining, which is in a
similar space. He’s seen his following on Elon Musk’s social media site X,
which he said was stuck for years between 32,000 and 34,000, swell to almost
50,000. And after a lengthy lull, investors are reaching out to him to try and
put money into his fund, he said.
Jackson has a lot riding on Opendoor, a company that saw
revenue and number of homes sold slip in the first quarter from a year earlier, and racked up
almost $370 million in losses over the past four quarters.
When the Board of Directors asked me to take on this role at the end of 2022, the company was in crisis. The real estate market was punishing, the business needed a reset, and the path forward was uncertain. My mandate was clear: stabilize the company and do what was necessary to survive. Of course, I said yes – because I believed in Opendoor.
It wasn’t easy, and it wasn’t about glamorous headlines, but we stopped the bleeding. We restructured the business, rebuilt an exceptional leadership team, set a bold vision for long-term value creation, and reshaped the company for the future – all against the backdrop of one of the toughest real estate markets on record. We went from $1 billion in losses when I took over, to announcing our first quarter of positive EBITDA in three years this past quarter. We architected a new strategy and moved from being a single-product operator to a multi-product platform for consumers and agents alike. And all the while, we continued to deliver for customers with an NPS of 80. I’m proud of the transformation we’ve driven together.
To everyone who helped steady this ship: thank you. This was a turnaround in every sense of the word. The last weeks of intense outside interest in Opendoor have come at a time when the company needs to stay focused and charging ahead. I believe the best thing I can do for Opendoor now is to accelerate my succession plans that I shared with the Board mid-year and make room for new leadership to take the reins.
I am pleased that the leadership team will continue to execute on the vision and strategy that we put in place. I am deeply grateful for the incredible team at Opendoor for their passion for reinventing the real estate business. The foundation is stronger, the vision is sharper, and the business is ready for what comes next. I’m closing this chapter with pride, clarity and gratitude.