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OpenDoor was hit hard by the pandemic this year, and laid off 35% of its workforce in April. As the home resale business started to recover, it looked for capital to fuel expansion and opted to go public through merging with Social Capital over a traditional initial public offering.
The San Francisco-based firm wanted to access the public market faster and with more certainty, worried the U.S. presidential election and the second wave of coronavirus could cast shadow on its growth, according to a person familiar with the discussions. In a SPAC deal, the funds raised by the company are committed upfront.
The merger is expected to close to by year end. Social Capital II shares jumped almost 35% on Tuesday.
A blank-check company, also known as a special purpose acquisition company (SPAC), uses capital raised through an initial public offering to buy a private company, usually within two years. The deal then takes the private company public.
Social Capital, the blank-check firm backed by Virgin Galactic Chairman Palihapitiya, raised $360 million when it went public in April.
In 2018, SoftBank’s Vision Fund invested $400 million in Opendoor, which was founded in 2014.
Reporting by Niket Nishant in Bengaluru and Krystal Hu in New York; Editing by Bernard Orr and David Gregorio
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