Shares of Opendoor Technologies, identified by the ticker symbol OPEN, decreased significantly after the company announced a refinancing of convertible debt, along with the acquisition of new debt. This development suggests ongoing challenges for the company in achieving profitability, a concern highlighted in its first-quarter earnings report. By 1:57 p.m. ET, the stock had fallen by 18.9%.
The company disclosed in a filing that it is refinancing $245.8 million in notes due in 2026 with new notes maturing in 2030, carrying an interest rate of 7%. Additionally, it is securing $79.2 million in new debt at the same interest rate. The conversion price is set at $1.57 per share, representing an 80% premium to the previous day’s closing price. This means the debt can be converted at this rate only if Opendoor’s stock price exceeds $1.57, potentially leading to significant dilution for the company given its current market capitalization of $515.8 million.
The refinancing may offer Opendoor increased financial flexibility and capital, while also extending the repayment timeline for its 2026 debt. However, this move also indicates the company’s precarious financial position and the challenges it faces in achieving profitability, particularly in a struggling housing market.
At the end of the first quarter, Opendoor held $559 million in cash, yet reported a loss of $696 million in operating cash flow over the past four quarters, demonstrating a substantial cash burn rate. Despite the stock’s low valuation, further declines in price are possible.
It’s noted that Jeremy Bowman and The Motley Fool hold no positions in the mentioned stocks and are subject to a disclosure policy.
