Opendoor's Reverse Split Gambit: Can It Save Its NASDAQ Listing and Shareholder Value?

Opendoor Technologies Inc. (NASDAQ: OPEN) finds itself at a critical juncture. With its stock price languishing below $1—a level that has triggered a formal NASDAQ delisting warning—the company has proposed a reverse stock split as a lifeline. The move aims to prop up its share price to meet listing requirements, but it comes with significant risks and uncertainties. For investors, the question is whether this technical fix can stabilize the stock or merely delay the inevitable.

The Delisting Dilemma

NASDAQ's May 28 notice to Opendoor followed 30 consecutive days of its stock closing below the $1 minimum bid price requirement. The company now has until November 24, 2025, to regain compliance by maintaining a closing price of at least $1 for 10 consecutive days. Failure could lead to delisting, though Opendoor may seek a 180-day extension by transferring its listing to the Nasdaq Capital Market, provided it meets other criteria.

The reverse stock split, proposed at a ratio between 1-for-10 and 1-for-50, offers a potential shortcut. By reducing the number of shares outstanding, the split would mechanically boost the share price. For instance, a 1-for-20 split would multiply the stock's price by 20, lifting it from $0.60 to $12. But this is a zero-sum game: shareholders would own fewer shares, and the company's market capitalization would remain unchanged.

The Immediate Rationale: Compliance Over Value

The split's primary goal is to meet NASDAQ's listing rules—not to improve fundamentals. Opendoor's Q1 2025 loss of $85 million (down from $113 million in Q4 2024) underscores its ongoing financial struggles. A reverse split would not address operational challenges, such as declining home sales or competition from traditional real estate firms.

Yet, the move could buy time. Competitors like Offerpad (NASDAQ: OFRD) have used reverse splits to avoid delisting, though Offerpad's stock remains volatile. For Opendoor, the split must be approved by shareholders at a July 28 special meeting. If rejected, the company's path to compliance narrows.

Risks: Liquidity and Sentiment

The proposal carries significant risks. A reverse split reduces liquidity by shrinking the number of tradable shares. A 1-for-50 split, for instance, would cut shares from ~800 million to ~16 million, potentially widening bid-ask spreads and discouraging trading. For retail investors, this could make the stock less attractive.

Investor sentiment is another hurdle. Reverse splits are often seen as a “desperation move,” signaling a company's weakness. Opendoor's stock has already lost 60% of its value since January 2024, and a split could amplify skepticism.

Long-Term Implications: Beyond the Split

Even if the split succeeds, Opendoor's survival hinges on broader trends. The iBuyer model—where companies buy homes at below-market prices for quick resale—has faced headwinds. Rising mortgage rates, housing oversupply, and regulatory scrutiny have pressured peers like Zillow and Redfin to exit the business. Opendoor's strategy now centers on partnerships and technology-driven efficiency, but execution remains unproven.

Forward-looking risks include:
- Debt obligations: The $325 million in 7% convertible notes due 2030, issued in May, extend its debt maturity but add interest burdens.
- Market conditions: A prolonged real estate downturn could worsen losses.
- NASDAQ's final decision: Even after a split, NASDAQ may question whether the company's fundamentals justify continued listing.

Investment Considerations

For investors, the reverse split creates a binary outcome:
1. Bull Case: The split lifts the stock above $1, delays delisting, and buys time for operational turnaround. Opendoor's $500 million market cap leaves room for recovery if it can stabilize its business.
2. Bear Case: The split fails to gain traction, liquidity dries up, and the stock sinks further, compounding the delisting risk.

Advice:
- Hold or buy only if you believe in Opendoor's long-term strategy. The reverse split is a stopgap; investors must weigh whether CEO Carrie Wheeler's focus on partnerships and tech can turn losses into profits.
- Avoid speculation. The stock's “penny stock” status and regulatory uncertainty make it a high-risk bet for most.
- Monitor the July 28 shareholder vote and post-split price action. A rejection or weak rebound could trigger a sell-off.

Backtest the performance of Opendoor Technologies (OPEN) when 'buy condition' is met 5 days before its shareholder meetings proposing reverse splits, and hold for 30 trading days post-meeting, from 2020 to 2025.

Historically, such strategies have proven perilous. Backtests from 2020 to 2025 reveal a -28.99% average return for a buy-and-hold approach around shareholder meetings proposing reverse splits, significantly underperforming the benchmark's 45.67% return. The strategy also faced a maximum drawdown of 52.33%, highlighting extreme volatility and poor risk-adjusted performance (Sharpe ratio of -0.25). These results underscore the risks of relying on technical fixes like reverse splits to drive value.

Conclusion

Opendoor's reverse split is a Hail Mary to avoid delisting, not a cure for its ailments. While it could technically lift the stock above $1, the real test lies in whether the company can rebuild trust with investors and navigate a hostile real estate market. For now, the move buys time—but time is running out.

Investors should proceed with caution, prioritizing fundamentals over technical fixes.