OPEN Your Mind

This is the author’s opinion only, not financial advice, and is intended for entertainment purposes only. The author holds a beneficial long position in Opendoor Technologies Inc. (NASDAQ: OPEN). The author receives no compensation for writing this article and has no business relationship with any of the companies mentioned.

I added Opendoor Technologies (NASDAQ: OPEN) to the Innovation and Freedom Portfolio at $3.37 on August 21. The online company operates a so-called iBuyer model, meaning it buys and sells homes. After a prolonged slump, OPEN has staged a remarkable rally in recent weeks, drawing comparisons to other meme stocks. The shares surged from a low of $0.51 to more than $6.65 (as of September 5) after Canadian hedge fund manager Eric Jackson identified Opendoor as a potential “100-bagger” and posted about it on X on July 14. Since then, Jackson has emerged as the leader of a retail investor movement. What sets Opendoor apart is that this army of retail investors achieved something unprecedented with remarkable speed: just one month after Jackson’s post on X, their campaign led to CEO Carrie Wheeler’s resignation on August 15, following widespread demands for a new strategy. Even the Wall Street Journal covered the development on August 31. Jackson is no stranger to contrarian calls. In 2023, he recommended Carvana when it was trading below $10, at a time when Wall Street had largely written the company off. His thesis was straightforward: despite operational challenges, the online used-car market addresses a fundamental consumer need. By July 2023, Carvana’s stock had soared above $400. The parallels to Opendoor are striking: a company left for dead, yet operating in a massive, inefficient market ripe for digital disruption. Perhaps there is more substance to Opendoor than in the typical meme stock phenomenon.

The term “meme stock” describes shares whose prices surge due to (coordinated) action by retail investors, often organised through social media. These movements make headlines when prices decouple sharply from fundamentals and left for dead stocks stage remarkable rallies. Yet this does not necessarily mean meme stocks lack substance. Palantir, for example, was dismissed as a meme stock not long ago. So perhaps conventional valuation paradigms sometimes fail to capture the true potential of certain companies. The history of equity valuation is one of continuous evolution: Benjamin Graham’s focus on balance sheets defined the postwar years, Warren Buffett emphasized qualitative growth, Peter Lynch popularized the PEG ratio, and so on. Many of the growth stocks that dominated the past decade had negative cash flows, an approach that would have appalled investors only a few decades earlier. With meme stocks, large groups of investors collectively identify opportunities. This democratized attention should not be underestimated. When thousands or even hundreds of thousands of retail investors, who are potential future customers of the company itself, see Opendoor’s potential to become the leading U.S. platform for resedential real estate, that attention becomes an asset in its own right. Retail investors do their homework, and ultimately, they are committing their own hard earned after tax dollars.

George Soros introduced the concept of reflexivity in his 1987 book The Alchemy of Finance to explain investment bubbles. He argued that fundamentals drive prices, but prices can also reshape fundamentals. Reflexivity is tricky in a bubble because it makes it difficult to identify. Yet in the case of a meme stock, which by conventional definition is a “bubble” at the start, reflexivity can work as a positive force. For Opendoor, its meme stock rally generated enormous attention that could directly benefit the platform. Media coverage builds brand recognition and may lower customer acquisition costs. If enough people believe in and the vision of transforming Opendoor to a real estate platform, network effects could emerge that validate the business model. A retail-driven shift toward an AI-native real estate platform might also attract top talent. Meanwhile, an elevated valuation could enable capital raises, giving management room to reduce iBuyer inventory and reinvest in AI technology. In this way, speculative valuation has the potential to become operational reality.

The case for the AI-native, frictionless home transaction platform Opendoor could become is dramatic. The United States is experiencing its worst housing affordability crisis in generations, so that President Trump recently considered to declare a national housing emergency. With mortgage rates above 7 percent and median home prices over $400,000, average monthly payments now exceed $3,000. The home price-to-median income ratio stands at historic highs above 7.5. For Millennials and Gen Z, homeownership has become virtually unattainable. At the same time, the lock-in effect of low-rate mortgages has frozen the market. Homeowners with 3 percent loans are unwilling to sell, constraining supply and keeping prices elevated. Another obstacle is the lack of mortgage portability in the United States. Unlike in some other countries, Americans mostly cannot transfer their favorable mortgage terms when moving between states. If this were to change through regulatory reform or innovative financial products, housing mobility would increase dramatically. For Opendoor, such a shift could translate into massive growth. With more transactions taking place, the platform would be ideally positioned as a neutral, technology-driven intermediary. Digital platforms have displaced traditional business models in nearly every sphere of life. Uber revolutionized mobility, Amazon transformed commerce, Robinhood democratized financial services, Airbnb disrupted hospitality, Netflix and Spotify replaced physical media. Yet the trillion dollar US real estate market remains dominated by structures from the 1950s. Average transaction costs of 8-10% of purchase price seem absurdly anachronistic.

The risks of transforming Opendoor to a platform for the frictionless transaction of real estate remain substantial. The realtor lobby will fight to preserve its business model, much as taxi lobbies once resisted Uber's disruption. However, the National Association of Realtors with approximately 1.5 million members has already suffered significant legal setbacks, including a $418 million antitrust settlement in March 2024 that ended its long-standing commission rules. The traditional 5-6% commission structure appears increasingly unsustainable in the digital age. Yet shifting from a capital-intensive iBuyer model to an AI-native platform requires a complete cultural overhaul within the company. Meanwhile, the balance sheet still carries $1.5 billion in property inventory as of Q2 2025, down from previous peaks but still a significant burden. The retail investor movement has given Opendoor unprecedented attention and a potential path forward, but success demands that management is able to transform the company to the platform it could be. The company must shed its iBuyer identity and embrace its potential as the technology platform that finally brings America's $47-50 trillion real estate market into the digital age. For this transformation to succeed, all stakeholders management, employees, and investors must open their minds to this transformation.