Shares of Opendoor Technologies dropped in pre-market trading after the company announced its first-ever share buyback.
Shares of Opendoor Technologies dropped in pre-market trading Thursday after the company announced its first-ever share buyback. This buyback was partly financed by a new $650 million convertible debt offering.
An 8-K filing with the Securities and Exchange Commission (SEC) mentioned that Opendoor used part of the proceeds from the debt raise to repurchase about 45.3 million shares, cutting its share count by roughly 5%.
CEO Kaz Nejatian positioned the move as a clear statement of confidence in Opendoor and its stock. In an X post, he said he also plans to personally purchase $100,000 worth of OPEN shares once legally permitted. “I’m all in, and I plan to keep buying,” Nejatian wrote. “The company is putting its money where its mouth is. Tomorrow, I will too.”
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He also mentioned that the company borrowed the money at a 0% coupon and still retained hundreds of millions of dollars to support growth. “I despise dilution,” Nejatian wrote. “When our own stock is one of the best uses of capital, we should buy it back.”
Opendoor’s stock fell as much as 5% in pre-market trade.
The filing mentioned Opendoor agreed to issue $650 million of 0.00% Convertible Senior Notes due in 2030 to private investors. The notes will not pay regular interest and mature on Aug. 15, 2030, unless they are converted or redeemed earlier. The initial conversion price is approximately $4.71 per share, representing a 35% premium to Opendoor’s $3.49 closing price on Aug. 12, before the transaction was announced.
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Nejatian also mentioned that the company took advantage of the volatility in OPEN stock to secure what he described as attractive financing. “Most companies would treat this as a headache, but we see it as an asset,” he wrote. “The best time to raise capital is when you don’t need it.
Nejatian also said that the capped call is designed to provide dilution protection up to an effective price of $10.38. “Not one net new Opendoor share will exist below $10.38,” he wrote. The remaining proceeds will be used for general corporate purposes. Nejatian said that includes buying more homes and funding faster growth.
Nejatian acknowledged that the transaction could be viewed as aggressive, particularly because Opendoor is taking on $650 million in convertible debt while simultaneously buying back stock. “Some people will call what we did today aggressive. They’re right,” he wrote. He also added that the company’s improving business performance gives it room to move more aggressively.