SoftBank-backed Opendoor To Merge With Blank Cheque Firm Social Capital II, And Go Public

SoftBank-backed home-selling platform Opendoor is going public through a merger with a blank-cheque company led by venture investor Chamath Palihapitiya in a deal that will value the combined entity at $4.8 billion, the companies said on Tuesday.

Opendoor buys properties from sellers and makes repairs, at a service charge, and then lists them for sale. As part of the deal with Social Capital Hedosophia Holdings Corp II, Opendoor will get $1 billion cash, including $600 million from investors such as BlackRock and Healthcare of Ontario Pension Plan and Palihapitiya.

Social Capital shares jumped 21% in pre-market trade.

A blank-cheque 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.

Once confined to the backwaters of capital markers, SPACs emerged this year as a major driver of IPOs, led in part recently by deals for space tourism company Virgin Galactic Holdings Inc and fantasy sports and gambling company DraftKings Inc.

Social Capital, the blank-cheque firm backed by Virgin Galactic Chairman Chamath Palihapitiya, raised $360 million when it went public in April.

SPAC acquisitions in 2020 have jumped to a record $27.4 billion, including debt, with a further $35.2 billion of deals announced and pending completion, according to SPAC Research. SPAC deals last year hit $24.8 billion.

Several private companies, including electric carmaker Fisker, healthcare services provider MultiPlan and sales and marketing services provider Advantage Solutions Inc, have gone public through a SPAC deal this year.

Other high-profile investors like Bill Ackman and Michael Klein have also raised billions through their SPACs this year. Ackman’s SPAC Pershing Square Tontine Holdings Ltd raised $4 billion in its IPO in July, making it the largest SPAC IPO.

In 2018, SoftBank’s Vision Fund invested $400 million in Opendoor, which was founded in 2014.

Reuters