What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-23 compared with 2022-02-24 · 520 added, 430 removed, 1124 unchanged (46% of the section changed)

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Notes to Consolidated Financial Statements

Condensed Financial Information of Opendoor Technologies Inc.

(Parent Com pany Only )

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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We have audited the accompanying consolidated balance sheets of Opendoor Technologies Inc.

and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, changes in temporary equity and shareholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and Schedule I listed in the Index at Item 8 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sponsor Warrants – Refer to Notes 1, 8, 13, and 15 to the financial statements

Real Estate Inventory, Net – Refer to Notes 1 and 3 to the financial statements

Critical Audit Matter Description

As described in Notes 1, 8, 13, and 15 to the financial statements, the Company recorded Sponsor Warrants as liabilities on the balance sheet at fair value.

Subsequent changes in the fair value of the warrants are recognized in the consolidated statement of operations at each reporting period.

The Company recognized $12 million of expense related to the fair value adjustment of the Sponsor Warrants for the year ended December 31, 2021.

As the Company completed the redemption of all of its outstanding Sponsor Warrants on July 9, 2021, there is no remaining balance related to the Sponsor Warrants as of December 31, 2021.

We identified the assessment of the accounting and classification of the Sponsor Warrants as a critical audit matter due to the complexity in assessing the exercise and settlement features unique to the Sponsor Warrants.

Auditing these elements required a

significant degree of auditor judgment and increased audit effort, including specialized skills and knowledge, due to the complexity of the application of the accounting guidance to the warrant features to determine the appropriate accounting and classification of the Sponsor Warrants.

At December 31, 2022, the Company’s real estate inventory, net balance was $4.46 billion.

Real estate inventory, net includes a valuation adjustment to record real estate inventory at the lower of cost or net realizable value.

The Company applies the specific identification method whereby each home constitutes a unit of account.

If the carrying amount or basis of inventory is not expected to be recovered, an inventory valuation adjustment is recorded to cost of revenue and the related assets are adjusted to their net realizable value.

For homes under sales contract, the net realizable value is the contract price less expected selling costs and concessions.

For homes that are not under sales contract, net realizable value is management’s internally developed projected sales price less expected selling costs and concessions.

The determination of net realizable value for homes not under sales contract requires management to make significant estimates related to projected sale prices.

Changes in these estimates could have a significant impact on the net realizable value and a significant change in net realizable value could cause a significant valuation adjustment.

We identified real estate inventory valuation adjustment for homes that are not under sales contract to be a critical audit matter due to the subjectivity of management’s judgement in forecasting the net realizable value of the real estate inventory, specifically with respect to the internally developed projected sales price.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s forecast of projected sales price.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Sponsor Warrants included the following, among others:

• We tested the effectiveness of controls over management’s accounting for the Sponsor Warrants, including those over the completeness and accuracy of the technical accounting analysis for significant and unusual transactions.

• We evaluated the Company’s analysis of the accounting for the Sponsor Warrants, including the completeness and accuracy of the information used in the analysis and the judgments made by management by utilizing the assistance of professionals in our firm with specialized skill and knowledge.

We consulted on management’s conclusion regarding the accounting for the Sponsor Warrants, including the classification of the Sponsor Warrants as liabilities and the treatment of subsequent changes in the fair value of the Sponsor Warrants.

• We evaluated the financial statement presentation and disclosures regarding the accounting conclusions reached, including the classification of the Sponsor Warrants.

Our audit procedures related to the internally developed projected sales price input used for real estate inventory valuation adjustments for homes that are not under sales contract included the following, among others:

• We evaluated whether the estimates of the real estate inventory adjustments for homes that are not under sales contract were consistent with evidence obtained in other areas of the audit, including internal communications to management and the Board of Directors.

• We developed an expectation of the real estate inventory valuation adjustment for homes that are not under sales contract and compared it to the recorded balance.

• We evaluated management’s ability to accurately forecast future projected sales price by comparing actual sales prices to management’s historical projected sales prices.

• With the assistance of our fair value specialists we:

◦ Evaluated the appropriateness of the methodology utilized by management to estimate the projected sales price.

◦ Developed a range of independent projected sales price estimates for a sample of individual homes using observable market data of actual sale transactions for comparable homes and compared those to management’s projected sales price.

/s/ Deloitte & Touche LLP

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INTANGIBLES – Net 12 12

OTHER ASSETS ($ 5 and $ — carried at fair value)

OTHER ASSETS 27 7

TOTAL ASSETS (1)

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CONVERTIBLE SENIOR NOTES 959 954

WARRANT LIABILITIES — 47

LEASE LIABILITIES – Net of current portion 38 42

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Accumulated deficit ( 3,058 ) ( 1,705 )

Accumulated other comprehensive (loss) income ( 2 ) —

Accumulated other comprehensive loss ( 4 ) ( 2 )

Total shareholders’ equity 1,086 2,248

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Technology and development 169 134 56

Goodwill impairment 60 — —

Restructuring 17 — 29

Total operating expenses 1,598 1,298 406

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INTEREST EXPENSE ( 385 ) ( 143 ) ( 68 )

OTHER INCOME – Net 38 4 13

OTHER (LOSS) INCOME – Net ( 10 ) 38 4

LOSS BEFORE INCOME TAXES ( 1,351 ) ( 661 ) ( 253 )

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NET LOSS $ ( 1,353 ) $ ( 662 ) $ ( 253 )

LESS NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

NET LOSS ATTRIBUTABLE TO OPENDOOR TECHNOLOGIES INC.

$ ( 662 ) $ ( 253 ) $ ( 341 )

Net loss per share attributable to common shareholders:

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NET LOSS $ ( 1,353 ) $ ( 662 ) $ ( 253 )

OTHER COMPREHENSIVE (LOSS) INCOME:

Unrealized gains on marketable securities ( 2 ) — —

OTHER COMPREHENSIVE LOSS:

Unrealized loss on marketable securities ( 2 ) ( 2 ) —

COMPREHENSIVE LOSS $ ( 1,355 ) $ ( 664 ) $ ( 253 )

LESS COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS — — 2

COMPREHENSIVE LOSS ATTRIBUTABLE TO OPENDOOR TECHNOLOGIES INC.

$ ( 664 ) $ ( 253 ) $ ( 341 )

See accompanying notes to consolidated financial statements.

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Comprehensive

Income (Loss) Non-

interests Total

Shareholders’

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BALANCE-December 31, 2019 40,089,513 $ 10 23,840,816 $ 20 29,070,700 $ 81 63,470,884 $ 258 157,952,523 $ 1,013 83,748,443 $ — $ 57 $ ( 790 ) $ — $ ( 733 )

Issuance of Series E-2 preferred stock — — — — — — — — 34,328,839 282 — — — — — — —

Issuance of Series D preferred stock — — — — — — 485,262 2 — — — — 3 — — 3

Issuance of common stock in stock in connection with acquisition — — — — — — — — — — 1,550,059 — 7 — — — 7

Vesting of restricted stock — — — — — — — — — — 2,106,144 — 1 — — — 1

Exercise of stock options — — — — — — — — — — 3,037,155 — 4 — — — 4

Repurchase of common stock — — — — — — — — — — ( 808,771 ) — ( 1 ) ( 3 ) — — ( 4 )

Stock-based compensation — — — — — — — — — — — — 13 — — — 13

Purchase of non- controlling interests — — — — — — — — — — — — ( 5 ) — — — ( 5 )

Capital distribution of non-controlling interests — — — — — — — — — — — — — — — ( 3 ) ( 3 )

Net loss — — — — — — — — — — — — — ( 341 ) — 2 ( 339 )

BALANCE–December 31, 2019 40,089,513 $ 10 23,840,816 $ 20 29,070,700 $ 81 63,470,884 $ 258 157,952,523 $ 1,013 83,748,443 $ — $ 57 $ ( 790 ) $ — $ — $ ( 733 )

Issuance of Series D preferred stock — — — — — — 485,262 2 — — — — 3 — — — 3

Issuance of Series E preferred stock — — — — — — — — 364,070 2 — — 1 — — 1

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Issuance of common stock — — — — — — — — — — 1,389,585 — 1 — — 1

Vesting of restricted stock — — — — — — — — — — 1,461,844 — — — — — —

Vesting of restricted shares — — — — — — — — — — 1,461,844 — — — — —

Exercise of stock options — — — — — — — — — — 5,638,019 — 8 — — 8

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Comprehensive

Income (Loss) Non-

interests Total

Shareholders’

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Issuance of common stock in connection with the February 2021 Offering 32,817,421 — 857 — — 857

Vesting of restricted stock 1,370,447 — — — — — —

Vesting of restricted shares 1,370,447 — — — — —

Vesting of restricted stock units 24,004,565 — — — — —

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Stock-based compensation — — 548 — — 548

Other comprehensive income — — — — ( 2 ) ( 2 )

Net loss — — — ( 662 ) — ( 662 )

BALANCE–December 31, 2021 616,026,565 $ — $ 3,955 $ ( 1,705 ) $ ( 2 ) $ 2,248

Vesting of restricted shares 628,193 — — — — —

Vesting of restricted stock units 17,279,891 — — — — —

Exercise of stock options 2,958,586 — 4 — — 4

Employee stock purchase plan 493,790 — 2 — — 2

Stock-based compensation — — 187 — — 187

Other comprehensive loss — — — — ( 2 ) ( 2 )

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Net loss $ ( 1,353 ) $ ( 662 ) $ ( 253 )

Adjustments to reconcile net loss to cash, cash equivalents, and restricted cash (used in) provided by operating activities:

Adjustments to reconcile net loss to cash, cash equivalents, and restricted cash provided by (used in) operating activities:

Depreciation and amortization 83 47 39

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Changes in fair value of derivative instruments — — 23

Goodwill impairment 60 — —

Changes in fair value of equity securities 35 ( 35 ) —

Payment-in-kind interest — — 4

Net fair value adjustments and gain (loss) on sale of mortgage loans held for sale ( 4 ) ( 3 ) —

Net fair value adjustments and loss on sale of mortgage loans held for sale ( 1 ) ( 4 ) ( 3 )

Origination of mortgage loans held for sale ( 118 ) ( 196 ) ( 128 )

Proceeds from sale and principal collections of mortgage loans held for sale 128 197 126

Loss on early extinguishment of debt 25 — —

Changes in operating assets and liabilities:

Escrow receivable 54 ( 83 ) 12

Real estate inventories ( 5,656 ) 834 17

Real estate inventory 896 ( 5,656 ) 834

Other assets 37 ( 52 ) 3

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Lease liabilities ( 8 ) ( 13 ) ( 7 )

Net cash (used in) provided by operating activities ( 5,794 ) 682 ( 272 )

Net cash provided by (used in) operating activities 730 ( 5,794 ) 682

CASH FLOWS FROM INVESTING ACTIVITIES:

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Purchase of non-marketable equity securities ( 25 ) ( 15 ) —

Proceeds from sale of non-marketable equity securities 3 — —

Capital returns from non-marketable equity securities 3 — —

Acquisitions, net of cash acquired ( 10 ) ( 33 ) —

Net cash used in investing activities ( 476 ) ( 22 ) ( 95 )

Net cash provided by (used in) investing activities 234 ( 476 ) ( 22 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of Series D preferred stock — — 35

Proceeds from issuance of Series E preferred stock — — 2

Proceeds from issuance of Series E-2 preferred stock — — 283

Proceeds from issuance of convertible senior notes, net of issuance costs — 953 —

Purchase of capped calls related to convertible senior notes ( 119 ) — —

Purchase of capped calls related to the convertible senior notes — ( 119 ) —

Proceeds from exercise of stock options 4 15 8

Proceeds from issuance of common stock for ESPP 2 — —

Proceeds from warrant exercise — 22 —

Proceeds from Business Combination and PIPE offering — — 1,014

Proceeds from February 2021 Offering 886 — —

Proceeds from the February 2021 Offering — 886 —

Issuance cost of common stock — ( 29 ) ( 43 )

Capital distributions of non-controlling interest — — ( 3 )

Proceeds from non-recourse asset-backed debt 10,108 11,499 1,309

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Proceeds from other secured borrowings 114 192 125

Principal payment on other secured borrowings ( 192 ) ( 121 ) ( 21 )

Principal payments on other secured borrowings ( 121 ) ( 192 ) ( 121 )

Payment of loan origination fees and debt issuance costs ( 26 ) ( 47 ) ( 3 )

Repurchase of common stock at fair value — — ( 3 )

Net cash provided by financing activities 7,342 161 646

NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 1,072 821 279

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH – Beginning of year 1,506 685 406

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH – End of year $ 2,578 $ 1,506 $ 685

Payment for early extinguishment of debt ( 10 ) — —

Net cash (used in) provided by financing activities ( 1,751 ) 7,342 161

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ( 787 ) 1,072 821

OPENDOOR TECHNOLOGIES INC.

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(In millions)

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH – Beginning of year 2,578 1,506 685

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH – End of year $ 1,791 $ 2,578 $ 1,506

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION – Cash paid during the period for interest $ 355 $ 122 $ 57

DISCLOSURES OF NONCASH FINANCING ACTIVITIES:

Stock-based compensation expense capitalized for internally developed software $ 16 $ 12 $ —

Conversion of preferred stock to common stock $ — $ — $ 1,386

Issuance of issuer stock rights in extinguishment of the 2019 Convertible Notes $ — $ — $ 213

Noncash financing, issuance of common stock for acquisition

Recognition of warrant liability $ — $ — $ 81

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Opendoor Technologies Inc.

(the “Company” and “Opendoor”) including its consolidated subsidiaries and certain variable interest entities (“VIEs”), is a leading digital platform for residential real estate.

By leveraging software, data science, product design and operations, Opendoor has rebuilt the service model for real estate and have made buying and selling possible on a mobile device.

(the “Company” and “Opendoor”) including its consolidated subsidiaries and certain variable interest entities (“VIEs”), is a managed marketplace for residential real estate.

By leveraging our centralized platform, Opendoor is working towards a future that enables sellers and buyers of residential real estate to experience a simple and certain transaction that is dramatically improved from the traditional process.

The Company was incorporated in Delaware on December 30, 2013.

Correction of Prior Period Amounts

On April 12, 2021, subsequent to the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, the Acting Director of the Division of Corporation Finance and the Acting Chief Accountant of the SEC issued a Staff Statement (the “Staff Statement”) on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”).

The Company took into consideration the guidance in the Staff Statement and Accounting Standards Codification 815-40, Derivatives and Hedging-Contracts in Entity’s Own Equity ("ASC 815-40") and evaluated the Public and Sponsor Warrants (each as defined herein and collectively the "Warrants").

The Warrants were issued in a private placement simultaneously with the closing of the initial public offering of Social Capital Hedosophia Holdings Corp.

II (“SCH”), assumed by the Company through the Business Combination (as defined herein) on December 18, 2020, and classified in shareholders' equity as of and for the year ended December 31, 2020.

While the Company concluded the Public Warrants meet the criteria to continue to be classified in shareholders' equity, the Company concluded the Sponsor Warrants do not meet the scope exception from derivative accounting prescribed by ASC 815-40 and should therefore be recorded as a liability on the Company’s consolidated balance sheet at fair value as of the closing of the Business Combination, with subsequent changes in their fair value recognized in the Company’s consolidated statement of operations at each reporting date.

The accounting for the Sponsor Warrants does not impact the Company’s financial statements in any reporting periods prior to the Business Combination, as the Company assumed the Warrants through the Business Combination which was accounted for as a reverse recapitalization.

The fair value of the Sponsor Warrants as of the Closing Date on December 18, 2020 and December 31, 2020 amounted to $ 81 million and $ 47 million, respectively.

The change in fair value from the Closing Date through December 31, 2020 amounted to a gain of $ 34 million.

The impact of the misstatement as of December 31, 2020 resulted in an understatement of the warrant liability of $ 47 million, and an overstatement of accumulated deficit and additional paid-in capital of $ 34 million and $ 81 million respectively.

The Company evaluated the impact of error related to the accounting treatment of Sponsor Warrants with respect to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and determined, based on consideration of quantitative and qualitative factors, that the error had an immaterial impact, individually and in aggregate.

The Company corrected its accounting for Sponsor Warrants in this Annual Report on Form 10-K for the year ended December 31, 2021.

The following table provides the impact of the correction on the Company's consolidated balance sheet as of December 31, 2020, as presented herein (in millions):

December 31, 2020

Previously Stated Adjustments As Corrected

WARRANT LIABILITIES $ — 47 $ 47

Total liabilities $ 576 47 $ 623

Additional paid-in capital $ 2,677 ( 81 ) $ 2,596

Accumulated deficit ( 1,077 ) 34 ( 1,043 )

Total shareholders' equity $ 1,600 ( 47 ) $ 1,553

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

The following table provides the impact of the correction on the Company's consolidated statement of operations for the year ended December 31, 2020 (in millions):

Year Ended December 31, 2020

Previously Stated Adjustments As Corrected

DERIVATIVE AND WARRANT FAIR VALUE ADJUSTMENT $ ( 26 ) 34 $ 8

LOSS BEFORE INCOME TAXES $ ( 287 ) 34 $ ( 253 )

NET LOSS $ ( 287 ) 34 $ ( 253 )

Net loss per share attributable to common shareholders:

Basic $ ( 2.62 ) $ 0.31 $ ( 2.31 )

Diluted $ ( 2.62 ) $ 0.31 $ ( 2.31 )

Other than the changes made to reflect the impact of the recognition of the fair value of the Sponsor Warrants liability at the Closing Date to additional paid-in capital and the subsequent remeasurement of the fair value of the warrant liability at December 31, 2020 to accumulated deficit, there have been no changes to the Company's consolidated statement of temporary equity and shareholders’ equity (deficit) (in millions).

Year Ended December 31, 2020

Previously Stated Adjustments As Corrected

Additional paid-in capital $ 2,677 ( 81 ) $ 2,596

Accumulated deficit ( 1,077 ) 34 ( 1,043 )

Total shareholders' equity $ 1,600 ( 47 ) $ 1,553

The following table provides the impact of the correction on the Company's consolidated statement of cash flows for the year ended December 31, 2020 (in millions):

Year Ended December 31, 2020

Previously Stated Adjustments As Corrected

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ ( 287 ) 34 $ ( 253 )

Adjustments to reconcile net loss to cash, cash equivalents, and restricted cash provided by (used in) operating activities:

Warrant fair value adjustment $ 3 ( 34 ) $ ( 31 )

DISCLOSURES OF NONCASH FINANCING ACTIVITIES:

Recognition of warrant liability $ — 81 $ 81

The Company was formed through a business combination with Social Capital Hedosophia Holdings Corp.

II (“SCH”), a Cayman Islands exempted company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).

The Business Combination, pursuant to which Opendoor Labs Inc.

became a wholly owned subsidiary of SCH and SCH changed its name from “Social Capital Hedosophia Holdings Corp.

II” to “Opendoor Technologies Inc.”, was completed on December 18, 2020, and was accounted for as a reverse recapitalization, in accordance with GAAP.

Basis of Presentation and Principles of Consolidation

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Certain prior period amounts in the consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation.

Reclassification of Prior Period Amounts

In November 2022, the Company announced a Restructuring Plan (See “Note 20 — Restructuring” for further information).

In order to more clearly present charges resulting from the Restructuring, the Company elected to present all Restructuring expenses as a separate line item on the consolidated statements of operations.

In 2020, the Company presented $ 29 million in restructuring charges within several lines on the consolidated statement of operations:

$ 21 million in General and administrative, $ 6 million in Sales, marketing and operations, and $ 2 million in Technology and development.

These amounts have been reclassified, in conformity with the current period’s presentation, to the Restructuring line item on the consolidated statements of operations.

These reclassifications had no effect on the reported results of operations.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

Actual results may differ materially from such estimates.

Significant estimates, assumptions and judgments made by management include, among others,

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that have a material impact on the amounts reported in the financial statements and accompanying notes.

Significant estimates, assumptions and judgments made by management include, among others, the determination of the fair value of common stock, share-based awards, warrants, and inventory valuation adjustment.

Management believes that the estimates and judgments upon which management relies are reasonable based upon information available to management at the time that these estimates and judgments are made.

To the extent there are material differences between these estimates, assumptions and judgments and actual results, the carrying values of the Company’s assets and liabilities and the results of operations will be affected.

The health of the residential housing market and interest rate environment have introduced additional uncertainty with respect to judgments, estimates, and assumptions, which may materially impact the estimates previously listed, among others.

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

the determination of the fair value of common stock, share-based awards, warrants, derivatives, and inventory valuation adjustment.

Management believes that the estimates and judgments upon which they rely are reasonable based upon information available to them at the time that these estimates and judgments are made.

To the extent that there are material differences between these estimates and actual results, the Company’s financial statements will be affected.

The COVID-19 pandemic introduced significant additional uncertainties with respect to estimates, judgments and assumptions, which may materially impact these estimates.

Significant Risks and Uncertainties

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the stability of the residential real estate market;

the impact of interest rate changes on demand and its costs;

the impact of interest rate changes on demand for and pricing of its products and on the cost of capital;

changes in technology, products, markets or services by the Company or its competitors;

the addition or loss of significant customers;

its ability to maintain or establish relationships with listings and data providers;

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Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, investments in marketable securities, and mortgage loans held for sale pledged under agreements to repurchase (“MLHFS”).

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, restricted cash, and investments in marketable securities.

The Company places cash and cash equivalents and investments with major financial institutions, which management assesses to be of high credit quality, in order to limit exposure of the Company’s investments.

Similarly, the Company’s credit risk on mortgage loans held for sale is mitigated due to having a large number of customers.

Further, the Company’s credit risk on mortgage loans held for sale is mitigated by the fact that the Company typically sells mortgages on the secondary market within a relatively short period of time after which the Company’s exposure is limited to borrower defaults within the initial few months of the mortgage.

Segment Reporting

For the years ended December 31, 2022, 2021, and 2020, the Company was managed as a single operating segment on a consolidated basis.

Furthermore, the Company determined that the Co-Founder and Chief Executive Officer is the Chief Operating Decision Maker as he is responsible for making decisions regarding the allocation of resources and assessing performance, as well as for strategic operational decisions and managing the organization at a consolidated level.

Furthermore, the Company determined that the Chief Executive Officer is the Chief Operating Decision Maker as the CEO is responsible for making decisions regarding the allocation of resources and assessing performance, as well as for strategic operational decisions and managing the organization at a consolidated level.

Cash and Cash Equivalents

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The use of the restricted cash balance related to the Company’s credit facilities are constrained by contract to purchasing real estate inventory and certain related activities.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

addition, the Company is required to maintain letters of credit and a time deposit account for certain of the Company’s office leases.

In addition, the Company is required to maintain letters of credit and a time deposit account for certain of the Company’s office leases.

See “Note 7 — Credit Facilities and Long-Term Debt” for further discussion.

Marketable Securities

Marketable equity securities are publicly traded and have readily determinable fair values with changes in fair value recorded in Other (loss) income-net.

The Company’s investments in marketable securities consist of debt securities classified as available-for-sale as well as marketable equity securities.

The Company’s available-for-sale debt securities are measured at fair value with unrealized gains and losses included in Accumulated other comprehensive income (loss) in shareholders’ equity and realized gains and losses included in Other income.

None of the Company’s investments in marketable securities were impaired for the years ended December 31, 2021, 2020 and 2019.

The Company’s marketable equity securities are measured at fair value with changes in fair value recognized in Other income.

See “Note 4 — Cash, Cash Equivalents, and Marketable Securities” for further discussion.

The Company’s available-for-sale debt securities are measured at fair

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

value with unrealized gains and losses included in Accumulated other comprehensive loss in shareholders’ equity and realized gains and losses included in Other (loss) income-net.

Non-Marketable Equity Securities and Equity Method Investments

Non-marketable equity securities and equity method investments are investments in privately held companies that do not have readily determinable fair values.

These securities are accounted for under one of the following accounting methods:

• Equity method:

This method is applied when the Company has the ability to exert significant influence over the investee.

The securities are recorded at cost and adjusted for the Company’s share of the investee’s earnings or losses, less any dividends received and/or impairments.

• Measurement alternative:

This method is followed for all remaining non-marketable equity securities.

These securities are recorded at cost minus impairment, if any, adjusted for changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer.

Realized and unrealized gains and losses or the Company's share of the investee's earnings or losses on non-marketable equity securities, including impairment losses, are recognized in Other (loss) income-net.

Any dividends on equity method investments are recognized as a reduction of the investment's carrying value.

Non-marketable equity securities and equity method investments are reported in Other assets.

The Company assesses whether an impairment loss on its non-marketable equity securities has occurred due to declines in fair value or other market conditions.

When the fair value of an equity method investment is less than its carrying value, the Company writes down the investment to fair value when the decline in value is considered to be other than temporary.

When the fair value of an investment accounted for using the measurement alternative is less than its carrying value, the Company writes down the investment to its fair value, without the consideration of recovery.

See “Note 4 — Cash, Cash Equivalents, and Investments” for further discussion.

Real Estate Inventory

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Real estate inventory cost includes but is not limited to the property purchase price, acquisition costs and direct costs to renovate or repair the home, less inventory valuation adjustments, if any.

Work-in-progress inventory includes homes undergoing updates and finished goods inventory includes homes ready for resale.

Work-in-progress inventory includes homes undergoing repairs and finished goods inventory includes homes that are listed for sale, including homes ready for listing, and homes under contract for sale.

Real estate inventory is reviewed for valuation adjustments at least quarterly.

If the carrying amount or basis is not expected to be recovered, an inventory valuation adjustment is recorded to cost of revenue and the related assets are adjusted to their net realizable value.

If the carrying amount or cost basis is not expected to be recovered, an inventory valuation adjustment is recorded to Cost of revenue and the related assets are adjusted to their net realizable value.

Mortgage Loans Held for Sale Pledged under Agreements to Repurchase

MLHFS pledged under agreements to repurchase include residential mortgages originated for sale in the secondary markets on a best-effort basis.

Mortgage loans held for sale pledged under agreements to repurchase (“MLHFS”) include residential mortgages originated for sale in the secondary markets on a best-effort basis.

The Company has elected the fair value option for all MLHFS (see “Note 8 — Fair Value Disclosures” ).

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Interest income on MLHFS is calculated based upon the note rate of the loan and recorded in Interest income.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Convertible Senior Notes

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as such, the capped calls were recorded as a reduction of additional paid-in capital within shareholders' equity and will not be subsequently remeasured.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Derivative Instruments

The Company’s derivative instruments are comprised of interest rate caps, interest rate lock commitments (“IRLCs”), and embedded conversion options related to the convertible notes issued in 2019 (the “2019 Convertible Notes”).

The Company’s derivative instruments are freestanding in nature and some are utilized as economic hedges.

These derivative instruments are recorded at fair value with changes recognized as a gain or loss to operations.

The Company’s derivative instruments were comprised of interest rate caps, interest rate lock commitments (“IRLCs”), and embedded conversion options related to the convertible notes issued in 2019 (the “2019 Convertible Notes”).

The Company’s derivative instruments were freestanding in nature and some were utilized as economic hedges.

These derivative instruments were recorded at fair value with changes recognized as a gain or loss to operations.

Beginning in 2021, the Company changed the fair value classification of IRLCs from Level 2 to Level 3 as the Company began to adjust for the estimated pull-through rate, a Company specific input that is unobservable to market participants.

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Office equipment 3 years

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

The Company determines if an arrangement is or contains a lease at inception or modification of the arrangement.

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Variable lease payments are excluded from the measurement of right-of-use assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

As the rates implicit on the Company’s leases for which it is the lessee are not readily determinable, the Company uses its incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments.

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Intangible assets are amortized based on their estimated economic lives, ranging from 1 to 5 years.

Non-marketable Equity Securities

The Company's non-marketable equity securities are strategic investments in privately held companies.

Non-marketable equity securities are investments that do not have a readily determinable fair value, which are measured at cost minus impairment, if any, adjusted for changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer (the “Measurement Alternative”).

All gains and losses on these investments, realized and unrealized, are recorded in Other income-net on the Company's consolidated statements of operations.

The Company assesses whether an impairment loss on its non-marketable equity securities has occurred due to declines in fair value or other market conditions.

If any impairment is identified for non-marketable equity securities, the Company writes down the investment to its fair value.

Non-marketable equity securities are reported in “Other assets” on the Company’s Consolidated Balance Sheets.

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment and definite-lived intangible assets, among other long-term assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount.

If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment loss is

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

recognized to the extent the carrying amount of the underlying asset exceeds its fair value.

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment and definite-lived intangible assets, among other long-lived assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment loss is recognized to the extent the carrying amount of the underlying asset exceeds its fair value.

The impairment loss recognized for the years ended December 31, 2022, 2021, and 2020 is related to abandonment of property and equipment, impairment and abandonment of certain internally developed software projects, and sublease of certain right of use assets.

The impairment loss recognized during the periods presented are as follows (in millions):

The impairment loss recognized during the periods presented is as follows (in millions):

Year Ended December 31,

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The amount of revenue recognized for each home sale is equal to the sale price of the home net of any concessions.

The Company generally provides a 90 -day guarantee on home sales, subject to terms and conditions.

Returns on home sales have been limited in the Company’s experience and it does not estimate for returns in recognizing revenue.

Other revenue consists primarily of title insurance facilitation revenue, closing and escrow services, real estate broker commissions, and gain (loss) on sale of mortgage loans.

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Sales, marketing and operations expense consists primarily of resale broker commissions, resale closing costs, holding costs related to real estate inventory including utilities, property taxes and maintenance, and expenses associated with product marketing, promotions and brand-building.

Sales, marketing and operations expense includes any headcount expenses in support of sales, marketing, and real estate inventory operations such as salaries, benefits, and stock-based compensation.

These costs are expensed as incurred.

Advertising costs are expensed as incurred.

For the years ended December 31, 2021, 2020, and 2019, expenses attributable to advertising totaled $ 123 million, $ 33 million, and $ 75 million, respectively.

Sales, marketing and operations expense includes any headcount expenses in

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

support of sales, marketing, and real estate inventory operations such as salaries, benefits, and stock-based compensation.

These costs are expensed as incurred.

Advertising costs are expensed as incurred.

For the years ended December 31, 2022, 2021, and 2020, expenses attributable to advertising totaled $ 200 million, $ 123 million, and $ 33 million, respectively.

Technology and Development

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Stock-Based Compensation

Stock-based compensation awards consist of stock options, restricted stock units (“RSUs”), and shares of restricted stock (“Restricted Shares”).

Stock-based compensation awards consist of stock options, restricted stock units (“RSUs”), and shares of restricted stock (“Restricted Shares”), and shares issued pursuant the 2020 Employee Stock Purchase Plan (“ESPP”).

Stock Options

The Company has granted stock options with a service condition to vest, which is generally four years .

The Company records stock-based compensation expense for service-based stock options on a straight-line basis over the requisite service period, which is generally the option’s vesting period.

The Company records stock-based compensation expense for service-based stock options on a straight-line basis over the requisite service period.

These amounts are reduced by forfeitures as they occur.

The Company uses the Black-Scholes-Merton option-pricing model to determine the fair value as of the grant date for stock options.

The Company has granted RSUs with a performance condition, based on a liquidity event, as defined by the share agreement, as well as a service condition to vest, which is generally four years .

The Company determines the fair value of RSUs based on the valuation of the Company’s common stock as of the grant date.

No compensation expense is recognized for performance-based awards until the liquidity event has occurred.

Subsequent to the occurrence of a liquidity event, compensation expense is recognized to the extent the requisite service period has been completed.

Compensation expense is recognized on an accelerated attribution basis over the requisite service period of the awards subject to the achievement of the liquidity event.

After the Company became listed, the RSUs granted are generally only subject to a service condition to vest and typically vest over four years .

Prior to its listing, the Company granted RSUs with a performance condition, based on a liquidity event, as defined by the share agreement, as well as a service condition to vest, which was generally four years .

The Company determined the fair value of RSUs based on the valuation of the Company’s common stock as of the grant date.

No compensation expense was recognized for performance-based awards until the liquidity event occurred in February 2021.

Subsequent to the occurrence of the liquidity event, compensation expense was recognized on an accelerated attribution basis over the requisite service period of the awards.

After the Company became listed, the RSUs granted are generally only subject to a service condition to vest and typically vest over two to four years.

Compensation expense is recognized on a straight-line basis subject to a floor of the vested number of shares for each award.

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The Company has granted RSUs with a performance condition, based on a liquidity event, as defined by the share agreement, as well as a market condition to vest.

Subject to the employee’s continued services to the Company, the market-based conditions are satisfied upon the Company's achievement of share price milestone calculated based on 60-day volume weighted average.

Subject to the employee’s continued services to the Company, the market-based conditions are satisfied upon the Company's achievement of certain share price milestones calculated based on 60-day volume weighted average.

For market-based RSUs, the Company determines the grant-date fair value utilizing Monte Carlo simulations, which incorporates various assumptions, including expected stock price volatility, contractual term, dividend yield, and stock price at grant date.

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The Company determines the requisite service period by comparing the derived service period to achieve the market-based condition and the explicit service-based period, if any, using the longer of the two service periods as the requisite service period.

Restricted Shares

The fair value of the Restricted Shares is equal to the estimated fair value of the Company’s common stock on the grant date.

The Company recognizes compensation expense for the shares on a straight-line basis over the requisite service period of

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Restricted Shares

The fair value of the Restricted Shares is equal to the estimated fair value of the Company’s common stock on the grant date.

The Company recognizes compensation expense for the shares on a straight-line basis over the requisite service period of the awards.

The fair value of these shares will be recognized into common stock and additional paid-in-capital as the shares vest.

The Company recognizes stock-based compensation expense related to purchase rights granted pursuant to the 2020 ESPP on a straight-line basis over the offering period.

The Company estimates the fair value of purchase rights granted under the ESPP using the Black-Scholes option-pricing model.

The Company records income taxes using the asset and liability method.

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Each whole warrant entitled the holder to purchase one share of Class A common stock at an exercise price of $ 11.50 per share (the “Public Warrants”).

Simultaneously with the closing of the IPO, SCH completed the private sale of 6,133,333 warrants to SCH’s sponsor at a price of $ 1.50 per warrant (the “Sponsor Warrants”).

Simultaneously with the closing of the IPO, SCH completed the private sale of 6,133,333 warrants to SCH’s sponsor at a price

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

of $ 1.50 per warrant (the “Sponsor Warrants”).

Each Sponsor Warrant allowed the sponsor to purchase one share of Class A common stock at $ 11.50 per share.

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The Company evaluated the Public and Sponsor Warrants under ASC 815-40, Derivatives and Hedging-Contracts in Entity’s Own Equity , and concluded that the Sponsor Warrants did not meet the criteria to be classified in shareholders’ equity.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Specifically, the exercise and settlement features for the Sponsor Warrants precluded them from being considered indexed to the Company’s own stock, given that a change in the holder of the Sponsor Warrants may alter the settlement of the Sponsor Warrants.

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The Company adopted this ASU as of January 1, 2021 and the adoption of this ASU did not have a material impact to the Company’s consolidated financial statements given that the Company has a full valuation allowance and the scenarios for which the guidance offer simplification are not significant for the Company.

In March 2020, the FASB issued ASU 2020-04 which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

This guidance is optional for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting.

The Company adopted this ASU as of January 1, 2021 and has elected to take advantage of this optional guidance in its transition away from LIBOR with certain debt contracts.

The Company’s existing LIBOR based debt arrangements generally include provisions that contemplate the transition from LIBOR, but certain arrangements may have such provisions added or modified as the transition becomes more imminent.

The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements as the transition from LIBOR has not occurred.

In August 2020, the FASB issued ASU 2020-06, to simplify accounting for certain financial instruments.

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The adoption of this ASU did not have a material impact to the Company’s consolidated financial statements.

This guidance is optional for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting.

The Company adopted this ASU as of January 1, 2021 and has elected to take advantage of this optional guidance in its transition away from LIBOR with certain debt contracts.

In December 2022, the FASB issued ASU 2022-06, which extends the period of time preparers can utilize the reference rate reform relief guidance.

The objective of the guidance in Topic 848 is

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

to provide relief during the temporary transition period, so the Board included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (LIBOR) would cease being published.

The standard defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

As of December 31, 2022, the Company did not have any credit facilities that utilized LIBOR, and as such, the adoption of this ASU did not have a material impact to the Company’s consolidated financial statements.

BUSINESS COMBINATIONS

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survived the merger and became a wholly owned subsidiary of SCH.

On December 18, 2020, SCH also filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

the necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which SCH was domesticated as a Delaware corporation, changing its name from “Social Capital Hedosophia Holdings Corp.

On December 18, 2020, SCH also filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which SCH was domesticated as a Delaware corporation, changing its name from “Social Capital Hedosophia Holdings Corp.

II” to “Opendoor Technologies Inc.” These transactions are collectively referred to as the “Business Combination.”

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In connection with the Business Combination, the Company incurred approximately $ 44 million of equity issuance costs, consisting of underwriting, legal, and other professional fees, which are recorded to additional paid-in capital as a reduction of proceeds

OSN acquisition

On September 4, 2019, the Company acquired 100 % of the outstanding equity of OS National LLC, including its consolidated subsidiaries (“OSN”).

OSN, a company based in Duluth, Georgia, provides settlement, escrow and title services to consumers, financial institutions, real estate investment trusts, private equity firms, mortgage servicers and institutional investors to facilitate residential and commercial real estate transactions.

The Company acquired OSN with the intent of streamlining the home-buying process for its customers by integrating settlement and escrow services into the Company’s existing product offerings.

The Company indirectly acquired OSN’s noncontrolling interest in the title companies originally formed as joint ventures between Opendoor and OSN for $ 5 million, which was recorded as an equity transaction.

As a result of this business combination, the Company became more vertically integrated with the ability to offer its customers OSN products and create a more seamless home buying experience while reducing its cost structure with respect to real estate transactions.

The acquisition-date fair value of the consideration transferred consisted of the following (in millions):

Cash consideration $ 34

Equity consideration – common stock 7

Total consideration transferred $ 41

Acquired intangible assets consist of trademarks and customer relationships valued at $ 5 million and $ 7 million, respectively.

The Company amortizes these acquired intangible assets over 5 years.

Other Acquisitions

On September 3, 2021, the Company acquired 100 % of the outstanding equity of Services Labs, Inc., including its consolidated subsidiaries (“Pro.com”), in exchange for $ 22 million in cash consideration.

The Company acquired Pro.com, a construction project platform, for its technology and talent.

Acquired intangible assets consist of developed technology valued at $ 4 million which will be amortized over one year .

Acquired intangible assets consisted of developed technology valued at $ 4 million and were amortized over one year .

Goodwill attributed to the Pro.com acquisition was $ 16 million.

On November 3, 2021, the Company acquired the assets of RedDoor HQ Inc.

(“RedDoor”) as part of a business combination in exchange for $ 15 million in cash consideration, of which $ 2 million was paid out one year following the date of closing.

The Company acquired the processes, systems and talent of RedDoor, which previously operated an online mortgage brokerage platform.

Acquired intangible assets consisted of developed technology valued at $ 3 million and were amortized over one year .

Goodwill attributed to the RedDoor acquisition was $ 13 million.

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

On November 3, 2021, the Company acquired the assets of RedDoor HQ Inc.

On November 4, 2022, the Company acquired TaxProper Inc.

as part of a business combination in exchange for $ 10 million in cash consideration, of which $ 3 million is to be paid out one year following the date of closing.

The Company acquired the processes, systems and talent of RedDoor, which previously operated an online mortgage brokerage platform.

Acquired intangible assets consist of developed technology valued at $ 3 million, which will be amortized over one year .

Goodwill attributed to the RedDoor acquisition was $ 13 million.

The Company acquired the processes, systems and talent of TaxProper, which previously provided tax forecasting, payments, and appeals services.

Acquired intangible assets consist of developed technology valued at $ 7 million and are being amortized over two years .

Goodwill attributed to the TaxProper acquisition was $ 2 million.

REAL ESTATE INVENTORY

The following table presents the components of inventory, net of applicable inventory valuation adjustments, as of the dates presented (in millions):

The following table presents the components of inventory, net of applicable inventory valuation adjustments of $ 459 million and $ 40 million as of December 31, 2022 and 2021, respectively (in millions):

December 31, 2022 December 31, 2021

Work-in-process $ 1,971 $ 183

Work-in-progress $ 891 $ 1,971

Finished goods

Listed for sale 2,788 2,325

Under contract for sale 781 1,800

Total real estate inventory $ 4,460 $ 6,096

As of December 31, 2022, the Company was in contract to purchase 1,011 homes for an aggregate purchase price of $ 331 million.

During the years ended December 31, 2022, 2021, and 2020, the Company recorded inventory valuation adjustments for real estate inventory of $ 737 million, $ 56 million, and $ 8 million, respectively, in Cost of revenue in the consolidated statements of operations.

CASH, CASH EQUIVALENTS, AND INVESTMENTS

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Money market funds 715 — — 715 715 —

Time deposit 300 — — 300 300 —

Corporate debt securities 126 — ( 4 ) 122 — 122

Mutual fund 200 — — 200 — 200

Equity securities 11 — — 11 — 11

Commercial paper 15 — — 15 — 15

Asset-backed securities 7 — — 7 — 7

Certificates of deposit 9 — — 9 — 9

Sovereign bonds 4 — — 4 — 4

Asset-backed securities 2 — — 2 — 2

Total $ 1,285 $ — $ ( 4 ) $ 1,281 $ 1,137 $ 144

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

December 31, 2021

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Money market funds 1,350 — — 1,350 1,350 —

Commercial paper 81 — — 81 81 —

Time deposit 300 — — 300 300 —

Corporate debt securities 208 — ( 1 ) 207 — 207

Mutual fund 200 — — 200 — 200

Equity securities 46 — — 46 — 46

Commercial paper 15 — — 15 — 15

Asset-backed securities 7 — — 7 — 7

agency securities 7 — — 7 — 7

Treasury securities 2 — — 2 — 2

Certificates of deposit 5 — — 5 — 5

Sovereign bonds 4 — — 4 — 4

Total $ 2,216 $ — $ ( 1 ) $ 2,215 $ 1,731 $ 484

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

During the years ended December 31, 2022 and 2021, the Company recognized $( 35 ) million and $ 35 million of net unrealized (losses) gains, respectively, in the consolidated statements of operations related to marketable equity securities.

A summary of debt securities with unrealized losses aggregated by period of continuous unrealized loss is as follows (in millions):

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December 31, 2022 Fair Value Unrealized

Money market funds $ 259 $ — $ — $ — $ 259 $ —

Corporate debt securities 5 — 117 ( 4 ) 122 ( 4 )

Commercial paper 15 — — — 15 —

Asset-backed securities 7 — — — 7 —

Certificates of deposit 6 — — — 6 —

Sovereign bonds 4 — — — 4 —

Asset-backed securities — — 2 — 2 —

Total $ 11 $ — $ 119 $ ( 4 ) $ 130 $ ( 4 )

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December 31, 2021 Fair Value Unrealized

Commercial paper $ 19 $ — $ — $ — $ 19 $ —

Money market funds $ 259 $ — $ — $ — $ 259 $ —

Corporate debt securities 207 ( 1 ) — — 207 ( 1 )

Commercial paper 15 — — — 15 —

Asset-backed securities 7 — — — 7 —

Certificates of deposit 5 — — — 5 —

Sovereign bonds 4 — — — 4 —

Total $ 497 $ ( 1 ) $ — $ — $ 497 $ ( 1 )

Net unrealized losses of the Company's available-for-sale debt securities as of December 31, 2022 and 2021 were $ 4 million and $ 1 million, respectively.

These unrealized losses are associated with the Company’s investments in corporate debt securities and were due to interest rate increases, and not credit-related events.

The Company does not expect to be

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

required to sell the investments before recovery of the amortized cost bases.

As such, no allowance for credit losses is required as of December 31, 2022 or 2021.

The scheduled contractual maturities of debt securities as of December 31, 2022 are as follows (in millions):

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Corporate-debt securities $ 122 $ 67 $ 55

Commercial paper 15 15 —

Asset-backed securities 7 7 —

Certificates of deposit 9 9 —

Sovereign bonds 4 4 —

Asset-backed securities 2 2 —

Total $ 133 $ 78 $ 55

As of December 31, 2021, the Company had $ 5 million of non-marketable equity securities measured using the Measurement Alternative.

The Company did no t record any adjustments to the carrying value of its non-marketable equity securities.

As of December 31, 2020, the Company had no non-marketable equity securities.

During the year ended December 31, 2021, the Company recognized $ 35 million of unrealized gains in the consolidated statements of operations related to equity securities still held as of December 31, 2021 .

A summary of non-marketable equity securities and equity method investment balances as of December 31, 2022 and 2021 are as follows (in millions):

2022 December 31,

Equity method investments $ 20 $ —

Non-marketable equity securities 5 5

Total $ 25 $ 5

DERIVATIVE INSTRUMENTS

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The notional amount is generally not exchanged, but is used only as the basis on which interest and other payments are determined.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Interest Rate Caps

The Company uses free-standing derivative instruments in the normal course of business as economic hedges to manage interest rate risks with respect to its variable asset-backed senior revolving credit facilities.

The Company has used free-standing derivative instruments in the normal course of business as economic hedges to manage interest rate risks with respect to its variable asset-backed senior revolving credit facilities.

The interest rate caps were carried at fair value in Other current assets with changes in fair value included in Other income.

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Interest Rate Lock Commitments

In originating mortgage loans, the Company enters into IRLCs with prospective borrowers which are freestanding derivative instruments.

In originating mortgage loans, the Company entered into IRLCs with prospective borrowers which are freestanding derivative instruments.

IRLCs are a commitment that binds the Company, subject to loan underwriting and approval process, to fund the loan at a specified interest rate, regardless of fluctuations in the market interest rates between commitment date and funding date.

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The 2019 Convertible Notes and the related bifurcated embedded conversion options were extinguished in September 2020.

Prior to extinguishment, the embedded conversion options were measured at fair value and were presented in Derivative and warrant liabilities.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

extinguishment, the embedded conversion options were measured at fair value and were presented in Derivative and warrant liabilities.

The change in fair value of the embedded conversion options is a component of Derivative and warrant fair value adjustment.

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The Company established certain special purpose entities (“SPEs”) for the purpose of financing the Company’s purchase and renovation of real estate inventory through the issuance of asset-backed debt.

The Company is the primary beneficiary of

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

the various VIEs within these financing structures and consolidates these VIEs.

The Company is the primary beneficiary of the various VIEs within these financing structures and consolidates these VIEs.

The Company is determined to be the primary beneficiary based on its power to direct the activities that most significantly impact the economic outcomes of the SPEs through its role in designing the SPEs and managing the real estate inventory they purchase and sell.

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Restricted cash 636 838

Real estate inventory 6,046 461

Real estate inventory, net 4,408 6,046

Total assets $ 5,082 $ 7,006

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Total liabilities $ 4,468 $ 6,172

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

________________

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(2) Includes accounts payable and other accrued liabilities and interest payable.

The creditors of the VIEs generally do not have recourse to the Company’s general credit solely by virtue of being creditors of the VIEs, with the exception of limited guarantees provided by an Opendoor subsidiary for credit facilities.

The creditors of the VIEs generally do not have recourse to the Company’s general credit solely by virtue of being creditors of the VIEs.

However, certain of the financial covenants included in the inventory financing facilities to which the VIEs are party are calculated by reference to Opendoor Labs Inc.

and its consolidated subsidiaries’ assets and liabilities.

As a result, under certain circumstances, this may limit our flexibility to transfer assets from Opendoor subsidiaries to the Parent Company.

See “Note 7 — Credit Facilities and Long-Term Debt” for further discussion of the recourse obligations with respect to the VIEs.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

CREDIT FACILITIES AND LONG-TERM DEBT

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Asset-backed Senior Revolving Credit Facilities

Revolving Facility 2018-2 $ 1,250 $ 759 $ — 2.84 % September 23, 2022 December 23, 2022

Revolving Facility 2018-3 750 673 — 2.39 % May 26, 2024 May 26, 2024

Revolving Facility 2018-2 $ 1,000 $ 472 $ — 4.86 % June 7, 2024 June 7, 2024

Revolving Facility 2019-2 1,850 1,149 — 2.52 % July 8, 2023 July 8, 2024

Revolving Facility 2019-3 925 886 — 3.25 % August 22, 2022 August 21, 2023

Revolving Facility 2018-3 1,000 194 — 3.98 % October 20, 2025 October 20, 2025

Revolving Facility 2019-1 900 55 — 4.41 % June 30, 2023 June 30, 2023

Revolving Facility 2019-2 1,850 167 — 3.92 % July 8, 2023 July 8, 2024

Revolving Facility 2019-3 925 — — 3.86 % April 5, 2024 April 4, 2025

Revolving Facility 2022-1 525 289 — 8.15 % December 31, 2022 October 31, 2023

Asset-backed Senior Term Debt Facilities

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Term Debt Facility 2021-S2 600 — 500 3.20 % September 10, 2024 September 10, 2025

Term Debt Facility 2021-S3 1,000 — — 3.75 % 5 Years from Initial Draw Date

5 Years, 6 Months from Initial Draw Date

Term Debt Facility 2021-S3 1,000 — 750 3.75 % January 31, 2027

July 31, 2027

Term Debt Facility 2022-S1 250 — 250 4.07 % March 1, 2025 September 1, 2025

Term Debt Facility 2022-S2 500 200 — 8.48 % January 31, 2023 December 31, 2023

Total $ 8,950 $ 1,377 $ 1,900

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Term Debt Facility 2020-M1 $ 2,500 $ — $ 1,000 10.00 % April 1, 2025 April 1, 2026

Term Debt Facility 2022-M1 500 — 150 10.00 % September 15, 2025 September 15, 2026

Total $ 3,000 $ — $ 1,150

2 unchanged sentences

Total Non-Recourse Asset-backed Debt $ 11,950 $ 1,376 $ 3,020

Recourse Debt - Other Secured Borrowings:

Mortgage Financing

Repo Facility 2019-R1 $ 100 $ 7 $ — 1.84 % May 26, 2022 May 26, 2022

Total Recourse Debt $ 100 $ 7 $ —

OPENDOOR TECHNOLOGIES INC.

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Revolving Facility 2021-1 125 — 2.15 %

Asset-backed Senior Term Debt Facilities

Term Debt Facility 2021-S1 — 400 3.48 %

Term Debt Facility 2021-S2 — 500 3.20 %

Term Debt Facility 2021-S3 — — 3.75 %

Total $ 4,240 $ 900

Issuance Costs ( 3 )

Carrying Value $ 897

Asset-backed Mezzanine Term Debt Facilities

Term Debt Facility 2020-M1 — 1,000 10.00 %

Term Debt Facility 2020-M1 — 100 10.00 %

Total $ — $ 1,000

8 unchanged sentences

The Company utilizes inventory financing facilities consisting of asset-backed senior debt facilities and asset-backed mezzanine term debt facilities to provide financing for the Company’s real estate inventory purchases and renovation.

The credit facilities are secured by the assets and equity of one or more SPEs.

Each SPE is a consolidated subsidiary of Opendoor and a separate legal entity.

Neither the assets nor credit of any such SPE are generally available to satisfy the debts and other obligations of any other Opendoor entities, except to the extent other Opendoor entities are also a party to the financing arrangements.

These facilities are non-recourse to Opendoor and, with limited exceptions, non-recourse to other Opendoor subsidiaries.

As of December 31, 2021, the Company had total borrowing capacity with respect to the Company’s non-recourse asset backed debt of $ 10.8 billion.

Borrowing capacity amounts under non-recourse asset backed debt as reflected in the table above are in some cases not fully committed and any borrowings above the fully committed amounts are subject to the applicable lender’s discretion.

As of December 31, 2021, the Company had fully committed borrowing capacity with respect to the Company’s non-recourse asset backed debt of $ 7.8 billion.

Asset-backed Senior Revolving Credit Facilities

The Company classifies the senior revolving credit facilities as current liabilities on the Company’s consolidated balance sheets as amounts drawn to acquire and renovate homes are required to be repaid as the related real estate inventory is sold, which the Company expects to occur within 12 months.

Borrowing capacity amounts under the senior revolving credit facilities as reflected in the table above are in some cases not fully committed and any borrowings above the fully committed amounts are subject to the applicable lender’s discretion.

As of December 31, 2021, the Company had fully committed borrowing capacity with respect to the Company’s senior revolving credit facilities of $ 3.9 billion.

These inventory financing facilities are typically secured by some combination of restricted cash, equity in real estate owning subsidiaries and related holding companies, and, for senior facilities, the real estate inventory financed by the relevant facility and/or beneficial interests in such inventory.

Each of the borrowers under the inventory financing facilities is a consolidated subsidiary of Opendoor and a separate legal entity.

Neither the assets nor credit of any such borrower subsidiaries are generally available to satisfy the debts and other obligations of any other Opendoor entities.

The inventory financing facilities are non-recourse to the Company and are non-recourse to Opendoor subsidiaries not party to the relevant facilities, except for limited guarantees provided by an Opendoor subsidiary for certain obligations involving “bad acts” by an Opendoor entity and certain other limited circumstances.

As of December 31, 2022, the Company had total borrowing capacity with respect to its non-recourse asset-backed debt of $ 12.0 billion.

Borrowing capacity amounts under non-recourse asset-backed debt as reflected in the table above are in some cases not fully committed and any borrowings above the committed amounts are subject to the applicable lender’s discretion.

Any amounts repaid for senior term and mezzanine term debt facilities reduce total borrowing capacity as repaid amounts are not available to be reborrowed.

As of December 31, 2022, the Company had committed borrowing capacity with respect to the Company’s non-recourse asset backed debt of $ 6.5 billion;

this committed borrowing capacity is comprised of $ 3.2 billion for senior revolving credit facilities, $ 2.1 billion for senior term debt facilities, and $ 1.2 billion for mezzanine term debt facilities.

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

The Company recognized $ 25 million in loss on extinguishment of debt on the consolidated statement of operations for the year ended December 31, 2022 related to the Company’s voluntary partial early repayment of an asset-backed mezzanine term debt facility.

This was made up of $ 10 million in prepayment fees and $ 15 million in write offs of associated unamortized deferred costs that were previously capitalized.

Asset-backed Senior Revolving Credit Facilities

The senior revolving credit facilities are typically structured with an initial revolving period of up to 24 months during which time amounts can be borrowed, repaid and borrowed again.

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These facilities may also have extensions subject to lender discretion that are not reflected in the table above.

Borrowings under the senior revolving credit facilities accrue interest at a rate based on a LIBOR reference rate plus a margin that varies by facility.

The Company may also pay fees on certain unused portions of the committed borrowing capacity, as defined in the respective credit agreements.

Borrowings under the senior revolving credit facilities accrue interest at various floating rates based on a London Interbank Offered Rate (“LIBOR”) or a secured overnight financing rate (“SOFR”), plus a margin that varies by facility.

As of December 31, 2022, all such floating rates were based on SOFR.

The Company may also pay fees on certain unused portions of committed borrowing capacity.

The Company’s senior revolving credit facility arrangements typically include upfront fees that may be paid at execution of the applicable agreements or be earned at execution and payable over time.

These facilities are generally fully prepayable at any time without penalty other than customary LIBOR breakage costs.

These borrowings are collateralized by cash, equity in the real estate owning SPEs, and the real estate inventory funded by the relevant facility.

The lenders have legal recourse only to the real estate-owning SPE borrowers, certain SPE guarantors, and the assets securing the debt, and do not have general recourse to the Company.

These facilities are generally fully prepayable at any time without penalty other than customary breakage costs.

The senior revolving credit facilities have aggregated borrowing bases, which increase or decrease based on the cost and value of the properties financed under a given facility and the time that those properties are in the Company’s possession.

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The Company classifies its senior term debt facilities as non-current liabilities on the Company's consolidated balance sheets because its borrowings under these facilities are generally not required to be repaid until the final maturity date.

Borrowing capacity amounts under the senior term debt facilities as reflected in the table above are in some cases not fully committed and any borrowings above the fully committed amounts are subject to the applicable lender’s discretion.

Any amounts repaid reduce total borrowing capacity as repaid amounts are not available to be reborrowed.

As of December 31, 2021, the Company had fully committed borrowing capacity with respect to the Company’s senior term debt facilities of $ 1.7 billion.

The total outstanding amount presented above includes $ 900 million of non-current liabilities;

the carrying value of the non-current liabilities is reduced by issuance costs of $ 3 million.

The senior term debt facilities are typically structured with an initial withdrawal period of up to 60 months during which the outstanding principal amounts are generally not required to be repaid when homes financed through those facilities are sold and instead are intended to remain outstanding until final maturity for each facility.

The senior term debt facilities are typically structured with an initial withdrawal period up to 60 months during which the outstanding principal amounts are generally not required to be repaid when homes financed through those facilities are sold and instead are intended to remain outstanding until final maturity for each facility.

Outstanding amounts drawn under each senior term debt facility are required to be repaid on the facility maturity date or earlier if accelerated due to an event of default or other mandatory repayment event.

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These facilities may also have extensions subject to lender discretion that are not reflected in the table above.

Borrowings under the senior term debt facilities accrue interest at a fixed rate.

Borrowings under the senior term debt facilities accrue interest at a fixed rate with the exception of Term Debt Facility 2022-S2, which accrues interest at a floating rate based on SOFR plus a margin.

The Company's senior term debt facilities may include upfront issuance costs that are capitalized as part of the facilities' respective carrying values.

These facilities are fully prepayable at any time but may be subject to certain customary prepayment penalties.

These borrowings are collateralized by cash, equity in the real estate owning SPEs, and the real estate inventory funded by the relevant facility.

The lenders have legal recourse only to the real estate-owning SPE borrowers, certain SPE guarantors, and the assets securing the debt, and do not have general recourse to the Company.

The senior term debt facilities have aggregated property borrowing bases, which increase or decrease based on the cost and the value of the properties financed under a given facility, the time that those properties are in the Company’s possession and the amount of cash collateral pledged by the SPE borrowers.

The borrowing bases for a given facility may be reduced as

The senior term debt facilities have aggregated property borrowing bases, which increase or decrease based on the cost and value of the properties financed under a given facility, the time those properties are in the Company’s possession and the amount of cash collateral pledged by the relevant borrowers.

The borrowing base for a given facility may be reduced as properties age or collateral performance declines beyond certain thresholds, and any borrowing base deficiencies may be satisfied through contributions of additional properties, cash or through partial repayment of the facility.

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

properties age beyond certain thresholds and any borrowing base deficiencies may be satisfied through contributions of additional properties, cash or through partial repayment of the facility.

Asset-backed Mezzanine Term Debt Facilities

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These facilities are structurally and contractually subordinated to the related asset-backed senior debt facilities.

Borrowing capacity under the mezzanine term debt facilities as reflected in the table above are not fully committed and any borrowings above the fully committed amounts are subject to the applicable lender’s discretion.

Any amounts repaid reduce total borrowing capacity as repaid amounts are not available to be reborrowed.

As of December 31, 2021, the Company had fully committed borrowing capacity with respect to the Company’s mezzanine term debt facilities of $ 2.3 billion.

The total outstanding amount presented above includes $ 1.0 billion of non-current liabilities;

the carrying value of the non-current liabilities is reduced by issuance costs of $ 35 million.

The mezzanine term debt facilities have been structured with an initial 42 month withdrawal period during which the outstanding principal amounts are generally not required to be repaid when homes financed through those facilities are sold and instead are intended to remain outstanding until final maturity.

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These facilities are fully prepayable at any time but may be subject to certain prepayment penalties.

These borrowings are collateralized by cash and equity in certain holding companies that own the Company’s real estate owning SPEs.

The lenders generally have legal recourse only to the applicable borrowers of the debt and their assets securing the debt and do not have recourse to Opendoor and, with limited exceptions, do not have recourse to other Opendoor subsidiaries.

The mezzanine term debt facilities have aggregated property borrowing bases, which increase or decrease based on the cost and the value of the properties financed under a given facility and time in the Company’s possession of those properties and the amount of cash collateral pledged by the relevant SPE borrower.

The borrowing base for a given facility may be reduced as properties age beyond certain thresholds and any borrowing base deficiencies may be satisfied through contributions of additional properties or cash or through partial repayment of the facility.

The borrowing base for a given facility may be reduced as properties age or collateral performance declines beyond certain thresholds, and any borrowing base deficiencies may be satisfied through contributions of additional properties or cash or through partial repayment of the facility.

The Company’s inventory financing facilities include customary representations and warranties, covenants and events of default.

Financed properties are subject to customary eligibility criteria and concentration limits.

The terms of these inventory financing facilities and related financing documents require Opendoor to comply with a number of customary financial and other covenants, such as maintaining certain levels of liquidity, tangible net worth or leverage (ratio of debt to equity).

The terms of these inventory financing facilities and related financing documents require an Opendoor subsidiary to comply with customary financial covenants, such as maintaining certain levels of liquidity, tangible net worth or leverage (ratio of debt to tangible net worth).

Certain of these financial covenants are calculated by reference to Opendoor Labs Inc.

and its consolidated subsidiaries’ assets and liabilities.

As a result, under certain circumstances, this may limit our flexibility to transfer assets from Opendoor subsidiaries to the Parent Company.

At December 31, 2022 and 2021, $ 565 million and $ 782 million, respectively, of the Company's net assets are restricted as they reflect minimum net asset requirements at Opendoor Labs Inc.

As of December 31, 2022, the Company was in compliance with all financial covenants and no event of default had occurred.

Mortgage Financing

To provide capital for Opendoor Home Loans, the Company utilizes a master repurchase agreement (the “Repurchase Agreement”) which is classified as a current liability on its consolidated balance sheets.

In March 2019, the Company entered into the Repurchase Agreement with a lender to provide short-term funding for mortgage loans originated by Opendoor Home Loans.

The facility provides short-term financing between the issuance of a mortgage loan and when Opendoor Home Loans

In 2022, the Company ceased providing correspondent lending or mortgage brokering services.

As a result, the Company no longer requires mortgage financing and terminated its master repurchase agreement (the “Repurchase Agreement”) in October 2022.

From March 2019 through its exit of mortgage lending and brokering services, the Company utilized the Repurchase Agreement to provide capital for Opendoor Home Loans.

The facility, which was classified as a current liability on the Company’s consolidated balance sheets, provided short-term financing between the issuance of a mortgage loan and when Opendoor Home Loans sold the loan to an investor.

In accordance with the Repurchase Agreement, the lender agreed to pay Opendoor Home Loans a negotiated purchase price for eligible loans and Opendoor Home Loans simultaneously agreed to repurchase such loans from the lender within a specified timeframe and at an agreed upon price that included interest.

Opendoor Labs Inc.

was the guarantor with respect to the Repurchase Agreement and the obligation to repurchase loans previously transferred under the arrangement for the benefit of the lender.

This financing arrangement was an important component of Opendoor Home Loans’ operations as a correspondent lender.

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

sells the loan to an investor.

In accordance with the Repurchase Agreement, the lender agrees to pay Opendoor Home Loans a negotiated purchase price for eligible loans and Opendoor Home Loans simultaneously agrees to repurchase such loans from the lender within a specified timeframe and at an agreed upon price that includes interest.

Opendoor Labs Inc.

is the guarantor with respect to the Repurchase Agreement and the obligation to repurchase loans previously transferred under the arrangement for the benefit of the lender.

As of December 31, 2021, the Repurchase Agreement has a borrowing capacity of $ 100 million, of which $ 20 million is fully committed.

The Repurchase Agreement includes customary representations and warranties, covenants and provisions regarding events of default.

As of December 31, 2021, $ 7 million in mortgage loans were financed under the facility, and Opendoor was in compliance with all financial covenants and no event of default had occurred.

Transactions under the Repurchase Agreement bear interest at a rate based on one-month LIBOR plus an applicable margin, as defined in the Repurchase Agreement, and are secured by residential mortgage loans available for sale.

The Repurchase Agreement contains margin call provisions that provide the lender with certain rights in the event of a decline in the market value of the assets purchased under the Repurchase Agreement.

The Repurchase Agreement is recourse to Opendoor Labs Inc.

Convertible Senior Notes

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The Capped Calls cover, subject to customary adjustments, the number of shares of the Company's common stock underlying the 2026 Notes.

By entering into the Capped Calls, the Company expects to reduce the potential dilution to its common stock (or, in the event of a conversion of the 2026 Notes settled in cash, to reduce its cash payment obligation) in the event that at the time of conversion of the 2026 Notes its common stock

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

price exceeds the conversion price.

The Capped Calls have an initial strike price of $ 19.23 per share and an initial cap price of $ 29.59 per share or a cap price premium of 100 %.

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Level 1 — Fair value determined based on quoted prices in active markets for identical assets or liabilities.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Level 2 — Fair value determined using significant observable inputs, such as quoted prices for similar assets or liabilities or quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data, by correlation or other means.

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Classification

Cash and cash equivalents Carrying value is a reasonable estimate of fair value based on short-term nature of the instruments.

Cash and cash equivalents Carrying value is a reasonable estimate of fair value based on the short-term nature of the instruments.

Level 1 estimated fair value measurement.

Restricted cash Carrying value is a reasonable estimate of fair value based on short-term nature of the instruments.

Restricted cash Carrying value is a reasonable estimate of fair value based on the short-term nature of the instruments.

Level 1 estimated fair value measurement.

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Level 1 recurring fair value measurement.

Equity securities Price is quoted given the securities traded on an exchange.

Equity securities Price is quoted given the securities are traded on an exchange.

Level 1 recurring fair value measurement.

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Level 3 recurring fair value measurement for fair value with unobservable inputs.

Non-marketable equity securities Fair value is estimated using the observable transaction price.

Level 2 non-recurring fair value measurement for fair value based on transaction price.

Non-recourse asset-backed debt

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Level 2 estimated fair value measurement.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Derivative and warrant liabilities

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Level 2 recurring fair value measurement.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Warrants Fair value is estimated using the Black-Scholes-Merton option pricing model with inputs and assumptions including the Company’s equity valuation, expected volatility, expected duration of the warrants, and associated risk-free rate.

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Corporate debt securities $ 122 $ — $ 122 $ —

Mutual fund 200 200 — —

Equity securities 11 11 — —

Commercial paper 15 — 15 —

Asset-backed securities 7 — 7 —

Certificates of deposit 9 — 9 —

Sovereign bonds 4 — 4 —

Mortgage loans held for sale pledged under agreements to repurchase 7 — 7 —

Asset-backed securities 2 — 2 —

Other current assets:

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Corporate debt securities $ 207 $ — $ 207 $ —

Mutual fund 200 200 — —

Equity securities 46 46 — —

Commercial paper 15 — 15 —

Asset-backed securities 7 — 7 —

agency securities 7 — 7 —

Treasury securities 2 — 2 —

Certificates of deposit 5 — 5 —

Sovereign bonds 4 — 4 —

Mortgage loans held for sale pledged under agreements to repurchase 7 — 7 —

Other current assets:

Mortgage loans held for sale 4 — 4 —

Total assets $ 495 $ 246 $ 249 $ —

Warrant liabilities:

Sponsor Warrants 47 — 47 —

Total liabilities $ 47 $ — $ 47 $ —

OPENDOOR TECHNOLOGIES INC.

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Restricted cash 654 654 654 —

Other assets:

Non-marketable equity securities 5 5 — 5

Non-recourse asset-backed debt $ 4,396 $ 4,427 $ — $ 4,427

Other secured borrowings 7 7 — 7

Convertible senior notes 959 391 — 391

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Other secured borrowings 7 7 — 7

Convertible senior notes 954 1,019 — 1,019

The following table shows a reconciliation from the opening balances to the closing balances for Level 3 Fair values (in millions):

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Balance as of December 31, 2019 $ 5 $ 42 $ —

Issuances 1 42 —

Exercise of warrants ( 7 ) — —

Net change in fair value ( 7 ) — —

Balance as of December 31, 2019 $ 5 $ 42 $ —

Settlement of 2019 Convertible Notes — ( 65 ) —

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Balance as of December 31, 2021 $ — $ — $ —

Additions — — 2

Originations/Terminations — — ( 3 )

Net change in fair value — — 1

Balance as of December 31, 2022 $ — $ — $ —

OPENDOOR TECHNOLOGIES INC.

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Internally developed software $ 105 $ 71

Computers 11 5

Security systems 18 10

Furniture and fixtures 3 3

Computers 13 11

Software implementation costs 4 3

Leasehold improvements 2 2

Furniture and fixtures 3 3

Office equipment 3 2

Leasehold improvements 2 2

Total 148 102

Accumulated depreciation and amortization ( 90 ) ( 57 )

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Right-of-use assets obtained in exchange for new or acquired lease liabilities $ 5 $ — $ 40

There were no other material lease modifications in the year ended December 31, 2021.

For the year ended December 31, 2020, terminations of certain operating leases resulted in the reduction of right-of-use assets and lease liabilities of approximately $ 28 million.

Of this reduction in operating lease liabilities and right-of-use assets, $ 28 million is attributable to the Company exercising an option to early terminate the Company’s lease in San Francisco.

As the Company does not anticipate returning to the San Francisco space, the Company accelerated amortization of the right-of-use asset by $ 13 million for the one year term remaining after exercising the early termination option.

For the year ended December 31, 2022, the Company signed a new lease that resulted in an increase to the right-of-use asset in the amount of $ 5 million and an increase in operating lease liabilities in the amount of $ 5 million.

There were no material lease modifications in the year ended December 31, 2022.

For the year ended December 31, 2020, the Company terminated certain operating leases.

The Company exercised an option to early terminate the Company’s lease in San Francisco and accelerated amortization of the right-of-use asset by $ 13 million for the one year term remaining after exercising the early termination option.

In exercising the Company’s early termination option, the Company incurred $ 5 million in early termination fees for the year ended December 31, 2020.

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GOODWILL AND INTANGIBLE ASSETS

For the year ended December 31, 2021, the carrying amount of goodwill increased by $ 29 million due to the acquisition of Pro.com and RedDoor.

For further information on the acquisition, see “Note 2 — Business Combination” .

There were no additions to goodwill for the year ended December 31, 2020.

No impairment of goodwill was identified for the years ended December 31, 2021, 2020, and 2019.

For the years ended December 31, 2022 and December 31, 2021, there were $ 4 million and $ 29 million additions to goodwill, respectively, due to acquisitions.

For more information on significant acquisitions, refer to “Note 2 — Business Combination” .

During the fourth quarter of 2022, the market price of our common stock declined significantly.

As such, the Company determined that an indicator of potential impairment existed and decided to perform an interim quantitative test for goodwill impairment.

Based on the quantitative analysis, the Company recorded a goodwill impairment charge of $ 60 million for the year ended December 31, 2022.

There was no impairment of goodwill identified for the years ended December 31, 2021 and 2020.

Intangible assets subject to amortization consisted of the following as of December 31, 2022 and 2021, respectively (in millions, except years):

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Remaining Weighted Average Useful Life

Developed technology $ 7 $ ( 2 ) $ 5 0.7

Customer relationships 7 ( 3 ) 4 2.7

Trademarks 5 ( 2 ) 3 2.7

Developed technology 3 ( 3 ) — 0

Intangible assets – net $ 19 $ ( 7 ) $ 12

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ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES

Accounts payable and accrued liabilities as of December 31, 2021 and 2020, consisted of the following (in millions):

Accounts payable and accrued liabilities as of December 31, 2022 and 2021, consisted of the following:

Accrued expenses due to vendors $ 47 $ 66

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For further information on the RSUs, see “ Note 14 — Share-Based Awards”.

On December 21, 2020, the Company’s common stock and warrants began trading on the Nasdaq Global Select Market (“Nasdaq”) under the ticker symbols “OPEN” and “OPENW,” respectively.

Pursuant to the Company’s certificate of incorporation, the Company is authorized to issue 3,000,000,000 shares of common stock with a par value of $ 0.0001 per share.

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

On December 21, 2020, the Company’s common stock and warrants began trading on the Nasdaq Global Select Market (“Nasdaq”) under the ticker symbols “OPEN” and “OPENW,” respectively.

Pursuant to the Company’s certificate of incorporation, the Company is authorized to issue 3,000,000,000 shares of common stock with a par value of $ 0.0001 per share.

On July 9, 2021, the Company completed the redemption of all of its outstanding Public and Sponsor Warrants and in connection with the redemption, the Public Warrants stopped trading on Nasdaq.

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The number of shares of the Company’s common stock available for issuance under the 2020 Plan automatically increases on the first day of each calendar year, beginning January 1, 2022 and ending on and including January 1, 2030, by the lesser of (a) a number equal to the excess (if any) of (1) 5 % of the aggregate number of shares of common Stock outstanding on the final day of the immediately preceding calendar year over (2) the number of shares of common Stock then reserved for issuance under the 2020 Plan as of such date, and (b) such smaller number of shares determined by the Company’s board of directors.

In connection with the close of the Business Combination, the Company’s board of directors approved the 2020 Employee Stock Purchase Plan (“ESPP”), which was last amended on December 6, 2021.

There are 5,438,506 shares of common stock initially reserved for issuance under the ESPP.

The number of shares of the Company’s common stock available for issuance under the ESPP automatically increases on the first day of each calendar year, beginning January 1, 2022 and ending on and

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

In connection with the close of the Business Combination, the Company’s board of directors approved the 2020 Employee Stock Purchase Plan (“ESPP”), which was last amended on December 6, 2021.

There are 5,438,506 shares of common stock initially reserved for issuance under the ESPP.

The number of shares of the Company’s common stock available for issuance under the ESPP automatically increases on the first day of each calendar year, beginning January 1, 2022 and ending on and including January 1, 2030, by the lesser of (a) 1 % of the total number of shares of common stock outstanding on December 31 of the immediately preceding calendar year and (b) such number of shares as is determined by the Company’s board of directors;

including January 1, 2030, by the lesser of (a) 1 % of the total number of shares of common stock outstanding on December 31 of the immediately preceding calendar year and (b) such number of shares as is determined by the Company’s board of directors;

provided that, no more than 54,385,060 shares may be issued under the ESPP.

As of December 31, 2021, no shares have been issued under the ESPP.

As of December 31, 2022, 493,790 shares have been issued under the ESPP.

2022 Inducement Plan

In July 2022, the Company’s board of directors adopted the 2022 Inducement Plan (the “Inducement Plan”).

Under the Inducement Plan, 31,200,000 shares were initially reserved for issuance.

The purpose of the Inducement Plan is to attract, retain and motivate prospective employees of the Company, particularly executive team members and employees joining as part of business combinations.

The Inducement Plan allows for the issuance of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents and other stock or cash based awards to new employees of the Company or any subsidiary of the Company.

Stock options and RSUs

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Balance – December 31, 2021 14,546 $ 2.12 4.7 $ 182

Granted 150 15.00

Exercised ( 2,959 ) 1.35

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The total intrinsic value of options exercised for the years ended December 31, 2022, 2021, and 2020, was $ 20 million, $ 144 million, and $ 46 million, respectively.

The weighted-average grant date fair value per option granted for the years ended December 31, 2021 and 2019 were $ 10.18 and $ 1.50 , respectively.

There were no options granted during the year ended December 31, 2020 .

RSUs typically vest upon a service-based requirement, generally over a four year period.

The weighted-average grant date fair value per option granted for the year ended December 31, 2021 was $ 10.18 .

There were no options granted during the years ended December 31, 2022 and 2020.

RSUs typically vest upon a service-based requirement, generally over a two or four year period.

Prior to 2021, certain awards also had a performance condition to vesting, which was satisfied upon completion of the February 2021 Offering and triggered the recognition of compensation expense for certain RSUs for which the time-based vesting condition had been satisfied or partially satisfied.

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Unvested and outstanding – December 31, 2022 54,547 $ 10.29

The total fair value of RSUs vested for the year ended December 31, 2021 was $ 599 million.

No RSUs vested during the years ended December 31, 2020 and 2019.

The total fair value of RSUs vested for the years ended December 31, 2022 and 2021 was $ 98 million and $ 599 million, respectively.

No RSUs vested during the year ended December 31, 2020.

Restricted Shares

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The total fair value of Restricted Shares vested for the years ended December 31, 2022, 2021, and 2020 was $ 1 million, $ 21 million, and $ 9 million, respectively.

The first offering period for the Company's 2020 ESPP began on March 1, 2022.

The ESPP, pursuant to Internal Revenue Code Section 423, allows eligible participants to purchase shares using payroll deductions of up to 15 % of their total compensation, subject to a $ 25,000 calendar year limitation on contributions.

The Company has limited the maximum number of shares to be purchased in an offering period to 1,000 shares per employee.

The ESPP allows eligible employees to purchase shares of the Company’s common stock at a 15 % discount on the lower price of either (i) the offer period start date or (ii) the purchase date.

Each offering period is six months in duration.

ESPP employee payroll contributions withheld as of December 31, 2022 were $ 2 million and are included within Accounts payable and other accrued liabilities in the consolidated balance sheets.

Payroll contributions withheld as of December 31, 2022 will be used to purchase shares at the end of the current ESPP purchase period ending on February 28, 2023.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

The fair value of ESPP purchase rights is estimated at the date of grant using the Black-Scholes option-pricing valuation model.

The following assumptions were applied in the model to estimate the grant-date fair value of the ESPP.

Offering Period

September 1, 2022 - February 28, 2023 March 1, 2022 - August 31, 2022

Fair value $ 1.78 $ 3.55

Volatility 94.5 % 101.4 %

Risk-free rate 3.34 % 0.60 %

Expected life (in years) 0.5 0.5

Expected dividend $ — $ —

The Company recognized stock-based compensation expense related to the ESPP of $ 2 million during the year ended December 31, 2022.

As of December 31, 2022, total estimated unrecognized compensation expense related to the ESPP was $ 0.3 million.

The unamortized compensation costs are expected to be recognized over the remaining term of the offering period of 2 months.

Stock-based compensation expense

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Total stock-based compensation expense $ 171 $ 536 $ 38

During the year ended December 31, 2021, the Company issued market condition RSUs to certain executives with a grant-date fair value of $ 22 million, which will be recognized over a requisite service period ranging from 6 months to 3 years.

The Company recognized $ 290 million and $ 20 million of compensation expense during the years ended December 31, 2021 and 2020, respectively, related to all market condition awards outstanding.

In June 2021, the market condition for two market

The Company recognized $( 13 ) million, $ 290 million, $ 20 million of compensation expense during the years ended December 31, 2022, 2021, and 2020 respectively, related to all market condition awards outstanding.

In December 2022, Eric Wu resigned as CEO of Opendoor, resulting in a $ 57 million reversal of stock-based compensation expense related to his market condition awards.

In June 2021, the market condition for two market condition awards was satisfied, which resulted in the accelerated recognition of $ 2 million of stock-based compensation expense in the year ended December 31, 2021.

During the year ended December 31, 2022, no market conditions were satisfied.

As of December 31, 2022, there was $ 383 million of unamortized stock-based compensation costs related to unvested RSUs, stock options, and Restricted Shares.

The unamortized compensation costs are expected to be recognized over a weighted-average period of approximately 2.3 years.

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

condition awards was satisfied, which resulted in the accelerated recognition of $ 2 million of stock-based compensation expense in the year ended December 31, 2021.

As of December 31, 2021, there was $ 628 million of unamortized stock-based compensation costs related to unvested RSUs, stock options, and Restricted Shares.

The unamortized compensation costs are expected to be recognized over a weighted-average period of approximately 2.9 years.

Valuation of options

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The expected dividend yield assumption is based on the Company’s current expectations about its anticipated dividend policy.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Valuation of RSUs and Restricted Stock

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(ii) developments in the Company’s business and stage of development;

the Company’s operational and financial performance and condition;

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Company’s operational and financial performance and condition;

(iii) issuances of preferred stock and the rights and preferences of preferred stock relative to common stock;

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In connection with the redemption, the Public Warrants stopped trading on the Nasdaq on July 9, 2021.

The Company recorded a decrease to the Derivative and warrant fair value adjustment of $( 12 ) million and $( 34 ) million for the change in fair value of the Sponsor Warrants for the years ended December 31, 2021 and 2020, respectively.

OPENDOOR TECHNOLOGIES INC.

1 unchanged sentence

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

The Company recorded a decrease to the Derivative and warrant fair value adjustment of $( 12 ) million for the change in fair value of the Sponsor Warrants for the year ended December 31, 2021.

Warrants to Purchase Series D Preferred Stock

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The Penny Warrants, the Warrant Commitment, and the Series E Warrants have been determined to be liabilities under ASC 480 as the underlying preferred shares have certain liquidation preferences in the event of a deemed liquidation.

For the Penny Warrants, the Warrant Commitment, and the Series E Warrants, the Company recorded no warrant fair value adjustment for the year ended December 31, 2021 and an increase to the warrant fair value adjustments of $ 3 million and $ 6 million for the years ended December 31, 2020 and 2019, respectively.

Income before income taxes consisted of losses from domestic operations of $ 661 million, $ 253 million, and $ 339 million for the years ended December 31, 2021, 2020, and 2019, respectively.

For the Penny Warrants, the Warrant Commitment, and the Series E Warrants, the Company recorded no warrant fair value adjustment for the years ended December 31, 2022 and December 31, 2021, and an increase to the warrant fair value adjustments of $ 3 million for the year ended 2020.

Marketing Warrants

On July 28, 2022, the Company entered into a warrant agreement with Zillow, Inc.

(“Zillow”) in connection with a partnership arrangement that allows for Zillow to purchase up to 6 million shares of common stock that will vest in tranches (each, a “Tranche”) upon Zillow providing resale marketing services to the Company.

Each Tranche will have an exercise price per share equal to the 30 -day trailing volume weighted average price per share of Opendoor Common Stock (“VWAP”) prior to the vesting date of that Tranche, subject to a $ 15 floor and $ 30 cap per share.

After a Tranche has vested, the Tranche can be exercised via a cash payment or a cashless exercise;

provided that the Company has the option to cash settle any exercise.

The warrant expires in July 2027, subject to extension for an additional Tranche and early termination under limited circumstances.

We expect Zillow to begin providing marketing services under the partnership arrangement in early 2023.

Accordingly, as of December 31, 2022, no warrant shares had vested.

Income before income taxes consisted of losses from domestic operations of $ 1.4 billion, $ 661 million, and $ 253 million for the years ended December 31, 2022, 2021, and 2020, respectively.

The following table summarizes the components of the Company’s provision for income taxes for the periods presented (in millions):

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Income Tax Provision $ 2 $ 1 $ —

For the years ended December 31, 2021, 2020, and 2019, the Company did not record any deferred federal and state income tax expense or benefit due to the full valuation allowance.

Additionally, the Company’s foreign current and deferred expense or benefit was immaterial.

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

For the years ended December 31, 2022, 2021, and 2020, the Company did not record any deferred federal and state income tax expense or benefit due to the full valuation allowance.

Additionally, the Company’s foreign current and deferred expense or benefit was immaterial.

Effective Tax Rate

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federal statutory and state income tax rates to net loss before income tax, primarily as the result of state income taxes, deduction limitation on executive compensation, and changes in the Company’s valuation allowance.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Deferred Taxes

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Lease Liabilities 11 11

Section 174 capitalization 50 —

Net operating loss 404 293

Total gross deferred tax assets 392 250

Total deferred tax assets 676 392

Valuation allowance ( 664 ) ( 376 )

Deferred tax assets, net of valuation allowance 12 16

Deferred tax liabilities:

Depreciation and amortization ( 2 ) ( 5 )

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Right-of-use assets ( 10 ) ( 10 )

Valuation allowance ( 376 ) ( 235 )

Net deferred tax assets $ — $ —

Deferred tax liabilities ( 12 ) ( 16 )

Net deferred tax assets and liabilities $ — $ —

A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized in a particular tax jurisdiction.

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Due to the losses the Company generated in the current and prior years, the Company believes it is not more likely than not that all of the deferred tax assets can be realized.

Accordingly, the Company established and recorded a full valuation allowance on its net deferred tax assets of $ 376 million as of December 31, 2021 and a

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

full valuation allowance on its net deferred tax assets of $ 235 million as of December 31, 2020.

Accordingly, the Company established and recorded a full valuation allowance on its net deferred tax assets of $ 664 million as of December 31, 2022 and a full valuation allowance on its net deferred tax assets of $ 376 million as of December 31, 2021.

The valuation allowance increased by $ 288 million and $ 141 million for 2022 and 2021, respectively primarily as a result of current year losses.

As of December 31, 2022, the Company had U.S.

federal and state net operating loss (“NOL”) carryforwards of $ 1.2 billion and $ 854 million, respectively, which will each begin to expire in 2034 if not utilized.

federal and state net operating loss (“NOL”) carryforwards of $ 1.7 billion and $ 1.2 billion, respectively, which will each begin to expire in 2034 if not utilized.

For NOLs arising after December 31, 2017, the Tax Cuts and Jobs Act of 2017 limits a taxpayer’s ability to utilize NOL carryforwards to 80% of taxable income and can be carried forward indefinitely (carryback is generally prohibited).

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Utilization of the net operating loss carryforwards are subject to various limitations due to the ownership change limitations provided by Internal Revenue Code (IRC) Section 382 and similar state provisions.

The Company performed an ownership analysis and identified three previous ownership changes in 2014, 2016 and 2020, as defined under Section 382 and 383 of the IRC, however none of the previous ownership changes resulted in a material limitation that will reduce the total amount of net operating loss carryforwards and credits that can be utilized.

The Company performed an ownership analysis and identified three previous ownership changes in 2014, 2016 and 2020, as defined under Section 382 and 383 of the IRC, however none of the previous

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

ownership changes resulted in a material limitation that will reduce the total amount of net operating loss carryforwards and credits that can be utilized.

Unrecognized Tax Benefits

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RELATED PARTIES

In 2018, an executive early exercised stock options to purchase 1,479,459 shares of unvested common stock at a price per share of $ 1.01 by issuing a promissory note to the Company for a total price of $ 1.5 million with an interest rate of 2.31 % per annum.

On June 29, 2021, the outstanding balance under the promissory note of $ 1.6 million was repaid in full.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

The Warrant Commitment and the subsequent Series E Warrants were issued to a counterparty that has an equity interest in the Company and a seat on the Company’s board of directors.

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See “Note 15 — Warrants” for further information.

During 2019, the Company acquired OSN.

See “Note 2 — Business Combination” for further information on the acquisition.

Prior to the acquisition, OSN conducted business with the Company as the noncontrolling member of the Company’s Title Companies.

The Company paid the member title and due diligence fees in the member’s capacity as a title and escrow agent.

Additionally, the Company paid the member management and administrative service fees, rent, and purchases of fixed assets in the member’s capacity as management and administrative service provider and lessor to the subsidiaries of OD Title Holdings and OD Title Sidecar.

NET LOSS PER SHARE

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The Company uses the two-class method to calculate net loss per share and apply the more dilutive of the two-class method, treasury stock method or if-converted method to calculate diluted net loss per share.

Undistributed earnings for each period are allocated to participating securities, including the Preferred Stock for applicable periods, based on the contractual participation rights of the security to share in the current earnings as if all current period earnings had been distributed.

As there is no contractual obligation for the Preferred Stock to share in losses, the Company’s basic net loss per share is computed by dividing the net loss attributable to common shareholders by the weighted-average shares of common stock outstanding during periods with undistributed losses.

Undistributed earnings for each period are allocated to participating securities, based on the contractual participation rights of the security to share in the current earnings as if all current period earnings had been distributed.

As there is no contractual obligation for participating securities to share in losses, the Company’s basic net loss per share is computed by dividing the net loss attributable to common shareholders by the weighted-average shares of common stock outstanding during periods with undistributed losses.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common shareholders for the years ended December 31, 2022, 2021, and 2020 (in millions, except share amounts which are presented in thousands, and per share amounts):

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2022 2021 2020

Basic net loss per share:

Net loss $ ( 662 ) $ ( 253 ) $ ( 339 )

Net income attributable to noncontrolling interests — — 2

Net loss attributable to common shareholders – basic $ ( 662 ) $ ( 253 ) $ ( 341 )

Weighted average shares outstanding – basic and diluted 592,574 109,301 79,977

Basic net loss per share $ ( 1.12 ) $ ( 2.31 ) $ ( 4.26 )

Diluted net loss per share:

Basic and diluted net loss per share:

Net loss $ ( 1,353 ) $ ( 662 ) $ ( 253 )

Net income attributable to noncontrolling interests — — 2

Gain on liability-classified warrants — — 8

Net loss attributable to common shareholders – diluted $ ( 662 ) $ ( 253 ) $ ( 349 )

Weighted average shares outstanding – basic and diluted 627,105 592,574 109,301

Diluted net loss per share $ ( 1.12 ) $ ( 2.31 ) $ ( 4.37 )

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Basic and diluted net loss per share $ ( 2.16 ) $ ( 1.12 ) $ ( 2.31 )

There were no preferred dividends declared or accumulated for the period.

In determining diluted EPS for the year ended December 31, 2019, the Company adjusted the numerator for fair value adjustments related to its Series D Preferred Warrants;

however, the exercise of the warrants results in additional participating securities being issued and the Company assumed such participating securities did not convert into additional common stock as that is the most dilutive settlement assumption.

The following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive, or issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period (in thousands):

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Common Stock Warrants — — 19,933

Series D Preferred Stock Warrants — — 485

Series E Preferred Stock Warrants — — 121

RSUs 54,547 53,446 46,525

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Restricted Shares — 692 2,148

Redeemable convertible preferred stock — — 314,424

Employee Stock Purchase Plan 1,867 — —

Total anti-dilutive securities 67,126 68,688 92,821

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See “Note 5 — Derivative Instruments” for more information.

Purchase Commitments

As of December 31, 2021, the Company was in contract to purchase 5,411 homes for an aggregate purchase price of $ 1.9 billion.

Lease Commitments

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The Company does not believe that it is reasonably possible that the resolution of these matters would result in any liability that would materially affect the Company’s consolidated results of operations or financial condition except as noted below.

On December 23, 2020, the Federal Trade Commission (“FTC”) notified the Company that they intend to recommend that the agency pursue an enforcement action against the Company and certain of its officers, if the Company is unable to reach a negotiated settlement acceptable to all parties.

This notice is related to an initial FTC civil investigative demand sent to the

OPENDOOR TECHNOLOGIES INC.

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(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Company in August 2019 seeking documents and information relating primarily to statements in Opendoor’s advertising and website comparing selling homes to Opendoor with selling homes in a traditional manner using an agent and relating to statements that Opendoor’s offers reflect or are based on market prices.

The Company is engaged in settlement negotiations with the FTC and has accrued an immaterial amount for this matter.

Any settlement could result in material monetary remedies and/or compliance requirements that could have a materially adverse impact on its financial results.

The Company cannot make an estimate of the possible loss or range of loss incremental to the amount accrued, if any, resulting from negotiations with the FTC at this time.

The Federal Trade Commission (“FTC”) began conducting an investigation into the Company in August 2019.

The inquiry related primarily to statements in the Company's advertising and website comparing selling homes to the Company with selling homes in a traditional manner using an agent and relating to statements that the Company’s offers reflect or are based on market prices.

The Company began discussing resolution of this matter with the FTC in December 2020.

After extensive negotiations, the Company agreed to enter into a consent order resolving all aspects of the inquiry, which became final on October 21, 2022.

Pursuant to the consent order, the Company did not admit to any wrongdoing and is required to possess competent and reliable supporting data prior to making statements regarding the costs, savings, repair costs, or financial benefits of Company services related to assisting consumers selling homes.

The consent order also required that the Company pay $ 62 million to the FTC (an amount previously accrued) and that the Company retain certain records and submit a compliance report to the FTC.

The $ 62 million fine was paid in October 2022.

On October 7, 2022 and November 22, 2022, purported securities class action lawsuits were filed in the United States District Court for the District of Arizona, captioned Alich v.

Opendoor Technologies Inc., et al.

2:22-cv-01717-JFM) (“Alich”) and Oakland County Voluntary Employees’ Beneficiary Association, et al.

Opendoor Technologies Inc., et al.

2:22-cv-01987-GMS) (“Oakland County”), respectively.

The complaints name as defendants the Company, certain of the Company’s current and former officers and directors, the underwriters of two securities offerings the Company made in 2021, and a selling shareholder, SVF Excalibur (Cayman) Limited.

The complaints allege that the Company and certain officers violated Section 10(b) of the Exchange Act and SEC Rule 10b-5, and that the Company, certain officers and directors, the underwriters, and SVF violated Section 11 and/or Section 12(a)(2) of the Securities Act, in each case by making materially false or misleading statements related to the effectiveness of the Company’s pricing algorithm.

The plaintiffs also allege that certain defendants violated Section 20(a) of the Exchange Act and Section 15 of the Securities Act, respectively, which provide for control person liability.

The complaints assert claims on behalf of all persons and entities that purchased, or otherwise acquired, Company common stock between December 21, 2020 and September 16, 2022 or pursuant to offering documents issued in connection with our business combination with SCH and the secondary public offerings conducted by the Company in February 2021 and September 2021.

The plaintiffs seek class certification, an award of unspecified compensatory damages, an award of interest and reasonable costs and expenses, including attorneys’ fees and expert fees, and other and further relief as the court may deem just and proper.

We believe that the allegations in the complaints are without merit and we intend to vigorously defend ourselves in the matter.

RESTRUCTURING

In November 2022, the Company initiated a reduction in workforce of 550 employees to realign the Company’s operational focus to support its multi-year growth, scale the business, and improve costs (the “Restructuring Plan”).

The Restructuring Plan included:

(i) reducing the Company’s headcount by 18 % and (ii) winding down of our mortgage lending and brokerage services.

The Restructuring Plan was substantially completed as of December 31, 2022.

As a result of the Restructuring Plan and the wind down of our mortgage services, the Company incurred restructuring costs of $ 17 million, resulting from severance, and other termination benefits for employees whose roles are being eliminated, and other restructuring costs related to winding down our mortgage services.

These costs have been presented within the Restructuring costs line in the Company’s consolidated statement of operations.

As of December 31, 2022, the Company has paid $ 13 million with the remaining $ 4 million included within Accounts payable and other accrued expenses in the Consolidated balance sheets.

On April 15, 2020, the Company initiated a reduction in workforce of 600 employees to achieve a more resilient cost structure in response to the uncertainties caused by COVID-19.

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This includes the Company’s exercise of the early termination option related to the Company’s San Francisco space, as discussed in “ Note 10 — Leases,” as well as the termination of other real estate leases.

For the year ended December 31, 2020, of the restructuring charges with respect to employee termination benefits and lease modifications, the Company presented $ 2 million in Cost of revenue, $ 5 million in Sales, marketing and operations expense, $ 2 million in Technology and development and $ 21 million in General and administrative in the Company’s consolidated statements of operations.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

For the year ended December 31, 2020, of the restructuring charges with respect to employee termination benefits and lease modifications, the Company presented $ 2 million in Cost of revenue and $ 29 million in Restructuring in the Company’s consolidated statements of operations.

SUBSEQUENT EVENTS

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OPENDOOR TECHNOLOGIES INC.

(PARENT COMPANY ONLY)

CONDENSED FINANCIAL INFORMATION

CONDENSED BALANCE SHEETS

(In millions, except share data)

Intangibles - net $ 1 $ 1

Investment in subsidiaries 2,046 3,202

TOTAL ASSETS $ 2,047 $ 3,203

LIABILITIES AND SHAREHOLDERS’ EQUITY

Accounts payable and other accrued liabilities $ 1 $ —

Interest payable 1 1

Convertible senior notes 959 954

Total liabilities 961 955

Shareholders’ equity:

Common stock, $ 0.0001 par value;

3,000,000,000 shares authorized;

637,387,025 and 616,026,565 shares issued, respectively;

637,387,025 and 616,026,565 shares outstanding, respectively

Additional paid-in capital 4,148 3,955

Accumulated deficit ( 3,058 ) ( 1,705 )

Accumulated other comprehensive income (loss) ( 4 ) ( 2 )

Total shareholders’ equity 1,086 2,248

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 2,047 $ 3,203

See accompanying note to condensed financial statements.

OPENDOOR TECHNOLOGIES INC.

(PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF OPERATIONS

(In millions)

Year Ended December 31,

2022 2021 2020

Operating expenses:

General and administrative $ 7 $ 7 $ —

Total operating expenses 7 7 —

Loss from operations ( 7 ) ( 7 ) —

Warrant fair value adjustment — 12 34

Interest expense ( 8 ) ( 2 ) —

(Loss) income before income taxes ( 15 ) 3 34

Income tax expense — — —

Earnings of subsidiaries ( 1,338 ) ( 665 ) ( 287 )

Net loss $ ( 1,353 ) $ ( 662 ) $ ( 253 )

See accompanying note to condensed financial statements.

OPENDOOR TECHNOLOGIES INC.

(PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF CASH FLOWS

(In millions)

Year Ended December 31,

2022 2021 2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income $ ( 1,353 ) $ ( 662 ) $ ( 253 )

Adjustments to reconcile net (loss) income to cash, cash equivalents (used in) provided by operating activities:

Earnings of subsidiaries 1,338 665 287

Depreciation and amortization, net of accretion 7 2 —

Warrant fair value adjustment — ( 12 ) ( 34 )

Interest payable — 1 —

Other ( 2 ) — —

Net cash used in operating activities ( 10 ) ( 6 ) —

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of intangible assets — ( 1 ) —

Investment in subsidiary ( 6 ) ( 1,860 ) ( 977 )

Distribution from subsidiary 10 139 6

Net cash provided by (used in) investing activities 4 ( 1,722 ) ( 971 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of convertible senior notes — 953 —

Purchase of capped calls related to convertible senior notes — ( 119 ) —

Proceeds from exercise of stock options 4 15 —

Proceeds from issuance of common stock for ESPP 2 — —

Proceeds from warrant exercises — 22 —

Proceeds from Business Combination and PIPE offering — — 1,014

Proceeds from February 2021 Offering — 886 —

Issuance of common stock — ( 29 ) ( 43 )

Net cash provided by financing activities 6 1,728 971

NET INCREASE IN CASH AND CASH EQUIVALENTS — — —

CASH AND CASH EQUIVALENTS - Beginning of year — — —

CASH AND CASH EQUIVALENTS - End of year $ — $ — $ —

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION – Cash paid during the period for interest $ 2 $ — $ —

DISCLOSURES OF NONCASH FINANCING ACTIVITIES:

Recognition of warrant liability $ — $ — $ 81

Issuance of common stock in extinguishment of warrant liabilities $ — $ ( 35 ) $ —

See accompanying note to condensed financial statements.

OPENDOOR TECHNOLOGIES INC.

(PARENT COMPANY ONLY)

Notes to Condensed Financial Statements

INTRODUCTION AND BASIS OF PRESENTATION

The accompanying condensed financial statements, including the note thereto, should be read in conjunction with the consolidated financial statements and notes thereto of Opendoor Technologies Inc.

found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

For purposes of these condensed financial statements, the Company’s wholly-owned subsidiaries are accounted for using the equity method of accounting.

Opendoor Labs, Inc.

entered into a merger agreement (the “Merger Agreement”) with Social Capital Hedosophia Holdings Corp.

II, (“SCH”) on September 15, 2020, which was consummated on December 18, 2020.

Upon consummation of the transactions contemplated by the terms of the Merger Agreement, Opendoor Labs Inc.

became a wholly owned subsidiary of SCH, which domesticated from the Cayman Islands to Delaware and changed its name to Opendoor Technologies Inc.

The merger and the domestication transactions, collectively referred to as the “Business Combination.” were accounted for as a reverse recapitalization whereby Opendoor Labs Inc.

was the accounting acquirer.

Operations prior to the Business Combination are those of Opendoor Labs Inc.

and therefore are attributed to the Parent Company of Opendoor Technologies Inc.

See “ Part II – Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 2.

Business Combinations ” for additional information

OPENDOOR TECHNOLOGIES INC.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

The information required by this Item 9 was previously reported in our Current Report on Form 8-K that was

filed with the Securities and Exchange Commission on December 18, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data