Company to Cut 85% of Workforce

Opendoor, the online real estate platform (OPEN), is facing a significant overhaul as co-founder and newly appointed board chair Keith Rabois aims to streamline operations and revitalize its corporate culture. Rabois, known for his candid assessments, suggests that remote work and an inflated workforce have hindered the company’s performance.

“There are 1,400 employees at Opendoor. I don’t know what most of them do. We don’t need more than 200 of them,” Rabois stated in a recent interview with CNBC’s “Squawk on the Street,” signaling a potentially dramatic reduction in headcount. This move comes on the heels of Opendoor’s decision to appoint Kaz Nejatian, formerly a top executive at Shopify (SHOP), as its new CEO. Nejatian’s appointment followed investor pressure that led to the resignation of Carrie Wheeler last month. Eric Wu, Opendoor’s first CEO, will also rejoin the board.

The changes at Opendoor reflect a desire to refocus the company’s strategy amid challenging market conditions and persistent profitability concerns.

The market’s initial reaction to the leadership shuffle was overwhelmingly positive, with Opendoor shares surging as much as 78% on Thursday. However, the stock experienced a pullback, declining over 13% on Friday. Despite the recent volatility, Opendoor’s stock remains up nearly 500% year-to-date, fueled in part by retail investor enthusiasm.

This enthusiasm began after hedge fund manager Eric Jackson publicly touted the company, contributing to a meme stock-like rally. However, some analysts argue that the underlying fundamentals haven’t significantly improved, as Opendoor continues to grapple with cash burn and relatively thin profit margins.

Opendoor’s core business model revolves around leveraging technology to streamline the process of buying and selling homes, with the company aiming to profit from the difference between acquisition and sale prices. While innovative in its approach, the company has faced challenges in scaling its operations and maintaining consistent profitability.

Rabois articulated his vision for Opendoor’s future, emphasizing the need to address the company’s cash burn and return to a collaborative, in-person work environment. He also critiqued the company’s previous diversity, equity, and inclusion (DEI) initiatives, suggesting a shift in approach.

“The culture was broken,” Rabois asserted. “These people were working remotely. That doesn’t work. This company was founded on the principle of innovation and working together in person. We’re going to return to our roots.”

New CEO Kaz Nejatian signaled his commitment to this new direction, stating that he would be present in the office starting Monday morning, underscoring the emphasis on in-person collaboration.

The success of Opendoor’s turnaround hinges on Nejatian’s ability to effectively implement Rabois’ vision, reduce costs, and improve the company’s core business model. The coming months will be critical in determining whether Opendoor can achieve sustainable profitability and deliver long-term value to its shareholders.