What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-15 compared with 2023-02-23 · 300 added, 456 removed, 1188 unchanged (39% of the section changed)

5 unchanged sentences

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Changes in Temporary Equity and Shareholders’ Equity (Deficit)

Consolidated Statements of Changes in Shareholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

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Condensed Financial Information of Opendoor Technologies Inc.

(Parent Com pany Only )

(Parent Company Only)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Critical Audit Matter Description

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.

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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.

For homes that are not under sales contract, net realizable value is management’s internal projection price less expected selling costs.

The determination of net realizable value for homes not under sales contract requires management to make significant estimates related to the internal projection price.

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.

We identified real estate inventory valuation adjustment for homes that are not under sales contract, which is the majority of the real estate inventory valuation adjustment, to be a critical audit matter due to the subjectivity of management’s judgment in forecasting the net realizable value of the real estate inventory, specifically with respect to the internal projection price.

How the Critical Audit Matter Was Addressed in the Audit

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:

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

• We tested the effectiveness of internal controls over the valuation process, including controls over the inputs to the internal projection price, calculation of the valuation adjustment, and management’s consideration of macroeconomic factors with respect to the valuation adjustment.

• 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 made inquiries of management throughout the period about the expected effects of macroeconomic factors on the internal projection price.

• 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.

• We evaluated management’s ability to accurately forecast the internal projection price by comparing actual sales prices to management’s historical internal projection 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.

◦ Evaluated the appropriateness of the methodology utilized by management to estimate the internal projection price.

◦ Developed a range of independent 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 internal projection price.

/s/ Deloitte & Touche LLP

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Escrow receivable 9 30

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

Real estate inventory, net 1,775 4,460

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RIGHT OF USE ASSETS 25 41

GOODWILL 4 60

INTANGIBLES – Net 5 12

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Non-recourse asset-backed debt - current portion — 1,376

Other secured borrowings — 7

Interest payable 1 12

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LEASE LIABILITIES – Net of current portion 19 38

OTHER LIABILITIES 1 —

Total liabilities (2)

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(1) The Company’s consolidated assets at December 31, 2023 and 2022 include the following assets of certain variable interest entities (“VIEs”) that can only be used to settle the liabilities of those VIEs:

Cash and cash equivalents, $ — and $ 9 ;

Restricted cash, $ 530 and $ 636 ;

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LOSS FROM OPERATIONS ( 386 ) ( 931 ) ( 568 )

DERIVATIVE AND WARRANT FAIR VALUE ADJUSTMENT — 12 8

LOSS ON EXTINGUISHMENT OF DEBT ( 25 ) — ( 11 )

WARRANT FAIR VALUE ADJUSTMENT

GAIN (LOSS) ON EXTINGUISHMENT OF DEBT

INTEREST EXPENSE ( 211 ) ( 385 ) ( 143 )

OTHER (LOSS) INCOME – Net ( 10 ) 38 4

OTHER INCOME (LOSS) – Net

107 ( 10 ) 38

LOSS BEFORE INCOME TAXES ( 274 ) ( 1,351 ) ( 661 )

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NET LOSS $ ( 275 ) $ ( 1,353 ) $ ( 662 )

OTHER COMPREHENSIVE LOSS:

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

OTHER COMPREHENSIVE INCOME (LOSS):

Unrealized gain (loss) on marketable securities

3 ( 2 ) ( 2 )

COMPREHENSIVE LOSS $ ( 272 ) $ ( 1,355 ) $ ( 664 )

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OPENDOOR TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN TEMPORARY

EQUITY AND SHAREHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

(In millions, except number of shares)

Temporary Equity Shareholders’ Equity (Deficit)

Preferred Stock

Shareholders’ Equity (Deficit)

Common Stock Additional

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Equity (Deficit)

Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Shares Amount

BALANCE-December 31, 2020 540,714,692 $ — $ 2,596 $ ( 1,043 ) $ — $ 1,553

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

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

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

Issuance of common stock in exchange for issuer stock rights — — — — — — — — — — 21,460,401 — — — — —

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

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

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

Issuance of common stock for settlement of RSUs, net of shares withheld for participant taxes 24,004,565 — — — — —

Common stock issued upon exercise of warrants 8,200,151 — 58 — — 58

Exercise of stock options 8,919,289 — 15 — — 15

Conversion of preferred stock to common stock ( 40,089,513 ) ( 10 ) ( 23,840,816 ) ( 20 ) ( 29,070,700 ) ( 81 ) ( 63,956,146 ) ( 260 ) ( 158,316,593 ) ( 1,015 ) 315,273,768 — 1,386 — — 1,386

Issuance of common stock in connection with Business Combination and PIPE offering — — — — — — — — — — 111,742,632 — 889 — — 889

Purchases of Capped Calls related to the 2026 Notes — — ( 119 ) — — ( 119 )

Stock-based compensation — — 548 — — 548

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

Net loss — — — ( 662 ) — ( 662 )

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OPENDOOR TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN TEMPORARY

EQUITY AND SHAREHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

(In millions, except number of shares)

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

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

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

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

Common stock issued upon exercise of warrants 8,200,151 — 58 — — 58

Issuance of common stock for settlement of RSUs, net of shares withheld for participant taxes 17,279,891 — — — — —

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

Purchases of Capped Calls related to the 2026 Notes — — ( 119 ) — — ( 119 )

Issuance of common stock under employee stock purchase plan, net of shares withheld for participant taxes 493,790 — 2 — — 2

Stock-based compensation — — 187 — — 187

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

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

Net loss — — — ( 1,353 ) — ( 1,353 )

BALANCE–December 31, 2022 637,387,025 $ — $ 4,148 $ ( 3,058 ) $ ( 4 ) $ 1,086

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

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

Issuance of common stock for settlement of RSUs, net of shares withheld for participant taxes 35,562,197 — ( 1 ) — — ( 1 )

Exercise of stock options 2,535,147 — 3 — — 3

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

Issuance of common stock under employee stock purchase plan, net of shares withheld for participant taxes

2,151,794 — 2 — — 2

Stock-based compensation — — 149 — — 149

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

Other comprehensive income — — — — 3 3

Net loss — — — ( 275 ) — ( 275 )

13 unchanged sentences

Warrant fair value adjustment — — ( 12 )

Gain on settlement of lease liabilities — ( 5 ) —

Inventory valuation adjustment 65 737 56

Changes in fair value of derivative instruments — — 23

Goodwill impairment — 60 —

Changes in fair value of equity securities 1 35 ( 35 )

Payment-in-kind interest — — 4

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

13 ( 1 ) ( 9 )

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

Proceeds from sale and principal collections of mortgage loans held for sale 1 128 197

Loss on early extinguishment of debt 25 — —

(Gain) loss on early extinguishment of debt

Changes in operating assets and liabilities:

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CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of Series E preferred stock — — 2

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

Repurchase of convertible senior notes

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

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Proceeds from warrant exercise — — 22

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

Proceeds from the February 2021 Offering — — 886

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NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ( 251 ) ( 787 ) 1,072

OPENDOOR TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

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

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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION – Cash paid during the period for interest $ 203 $ 355 $ 122

OPENDOOR TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

DISCLOSURES OF NONCASH FINANCING ACTIVITIES:

Stock-based compensation expense capitalized for internally developed software $ 23 $ 16 $ 12

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

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

Recognition of warrant liability $ — $ — $ 81

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

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(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.

By leveraging its centralized digital 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.

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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.

II” to “Opendoor Technologies Inc.”, was completed on December 18, 2020 (the “Closing”), 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

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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.

Notes to Consolidated Financial Statements

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

Significant Risks and Uncertainties

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For example, the Company believes that changes in any of the following areas could have a significant negative effect on the Company in terms of its future financial position, results of operations or cash flows:

public health crises, like the COVID-19 pandemic;

its rates of revenue growth;

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the outcomes of legal proceedings;

natural disasters and catastrophic events;

natural disasters and catastrophic events, such as pandemics or epidemics (including any future resurgence of COVID-19 or its variants);

scaling and adaptation of existing technology and network infrastructure;

its management of its growth;

its ability to attract and retain qualified employees and key personnel;

its ability to attract and retain qualified employees and

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

key personnel;

its ability to successfully integrate and realize the benefits of its past or future strategic acquisitions or investments;

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For the years ended December 31, 2023, 2022, and 2021, the Company was managed as a single operating segment on a consolidated basis.

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.

Furthermore, the Company determined that the Chief Executive Officer is the Chief Operating Decision Maker (“CODM”) 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 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

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.

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

Non-Marketable Equity Securities and Equity Method Investments

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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.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

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

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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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There will not be any gains or losses recognized upon a conversion.

Upon extinguishment of any portion of the 2026 Notes, the dif ference between the repurchase price of the extinguished notes and the respective net carrying amount is recorded as a gain or loss in Gain on extinguishment of debt in the condensed consolidated statements of operations.

See “Note 5 — Credit Facilities and Long-Term Debt” for details on the partial repurchase of the Company's convertible notes that occurred in the period.

The Company purchased certain capped calls in connection with the issuance of the 2026 Notes which it expects to reduce potential dilution from conversions of the 2026 Notes.

The capped calls were determined to be freestanding financial instruments that meet the criteria for classification in equity;

The capped calls were determined to be freestanding financial

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

instruments that meet the criteria for classification in equity;

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

Derivative Instruments

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.

See “Note 5 — Derivative Instruments” and “Note 8—Fair Value Disclosures” for further discussion.

Escrow Receivable

Escrow receivable consists of proceeds from home resale held in escrow prior to such proceeds being remitted to us.

Escrow receivable consists of proceeds from home resale held in escrow prior to such proceeds being remitted to the Company.

The Company reviews the need for an allowance for credit losses quarterly based on historical collections experience, among other factors.

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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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For operating leases, the Company recognizes straight-line rent expense.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

The Company’s lease arrangements may include options to extend or early terminate a lease, which it does not include in expected lease terms unless they are reasonably certain to be exercised.

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

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

Impairment of Long-Lived Assets

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Other revenue represents an insignificant portion of the Company’s total revenue.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

The Company recognizes revenue when it satisfies its performance obligations by transferring control of promised goods or services to its customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

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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

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(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.

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.

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

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

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 .

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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.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

Restricted Shares

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In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.

If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

If the Company determines that it would be able to realize its deferred tax assets in the future in excess of

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions on the basis of a two-step process whereby:

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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

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”).

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”).

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 end of the redemption period was July 9, 2021, at which time the Company redeemed all unexercised warrants at a price of $ 0.10 per Warrant.

Recently Issued Accounting Standards

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740).

ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

It also clarifies and simplifies other aspects of the accounting for income taxes.

This guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

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

This guidance eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity.

The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity.

The standard also amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments.

The Company adopted this ASU as of January 1, 2021 using the modified retrospective method.

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

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.

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.

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(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

Opendoor Labs Inc.

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

II, (“SCH”) on September 15, 2020.

Pursuant to the Merger Agreement, Hestia Merger Sub Inc., a newly formed subsidiary of SCH (“Merger Sub”), merged with and into Opendoor Labs Inc.

Upon the completion of the transactions contemplated by the terms of the Merger Agreement (the “Closing”) on December 18, 2020, the separate corporate existence of Merger Sub ceased and Opendoor Labs Inc.

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 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.”

The Business Combination was accounted for as a reverse recapitalization whereby SCH was determined as the accounting acquiree and Opendoor Labs Inc.

as the accounting acquirer.

This accounting treatment is equivalent to Opendoor Labs Inc.

issuing stock for the net assets of SCH, accompanied by a recapitalization whereby no goodwill or other intangible assets are recorded.

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

At the Closing, the Company received consideration of $ 377 million in cash as a result of the reverse recapitalization.

In connection with the Business Combination, SCH entered into subscription agreements with certain investors, whereby it issued 60,005,000 shares of common stock at $ 10.00 per share (“PIPE Shares”) for an aggregate purchase price of $ 600 million (“PIPE Investment”), which closed simultaneously with the consummation of the Business Combination.

Upon the Closing, the PIPE Shares were automatically converted into shares of the Company's common stock on a one-for-one basis.

Upon the Closing, holders of Opendoor Labs Inc.

common stock received shares of Opendoor Technologies common stock in an amount determined by application of the exchange ratio of 1.618 (“Exchange Ratio”), which was based on Opendoor Labs Inc.’s implied price per share prior to the Business Combination.

For periods prior to the Business Combination, the reported share and per share amounts have been retroactively converted (“Retroactive Conversion”) by applying the Exchange Ratio.

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

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 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.

Notes to Consolidated Financial Statements

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

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 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.

Recently Issued Accounting Standards

Recently Adopted Accounting Standards

In July 2023, the FASB issued ASU 2023-03 which amends various paragraphs in the Accounting Standards Codification pursuant to the issuance of Commission Staff Bulletin No.

These updates were effective immediately and did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

In October 2023, the FASB issued ASU 2023-06 which is intended to clarify or improve disclosure and presentation requirements of a variety of topics.

It will allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirements and align the requirements in the FASB accounting standard codification with the SEC's regulations.

The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, or if the SEC has not removed the applicable disclosure requirement by June 30, 2027, the amendment will not be effective for any entity.

Early adoption is prohibited.

The Company is currently assessing the impact on the Company's disclosures.

In November 2023, the FASB issued ASU 2023-07, which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

This guidance is effective for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted and retrospective application to all prior periods presented in the financials is required.

The Company is currently assessing the impact on the Company's consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, which expands income tax disclosure requirements to include additional information related to the rate reconciliation of effective tax rates to statutory rates as well as additional disaggregation of taxes paid.

This guidance is effective for fiscal years beginning after December 15, 2024, and early adoption is permitted.

The Company is currently assessing the impact on the Company's disclosures.

REAL ESTATE INVENTORY

8 unchanged sentences

During the years ended December 31, 2023, 2022, and 2021, the Company recorded inventory valuation adjustments for real estate inventory of $ 65 million, $ 737 million, and $ 56 million, respectively, in Cost of revenue in the 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)

CASH, CASH EQUIVALENTS, AND INVESTMENTS

6 unchanged sentences

Equity securities 15 — — 15 — 15

Certificates of deposit 9 — — 9 — 9

Asset-backed securities 2 — — 2 — 2

Total $ 1,069 $ — $ ( 1 ) $ 1,068 $ 999 $ 69

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

December 31, 2022

2 unchanged sentences

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

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.

During the years ended December 31, 2023 and 2022, the Company recognized $ 4 million and $( 35 ) million of net unrealized gains (losses), 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):

2 unchanged sentences

Corporate debt securities $ — $ — $ 54 $ ( 1 ) $ 54 $ ( 1 )

Certificates of deposit 6 — — — 6 —

Asset-backed securities — — 2 — 2 —

Total $ — $ — $ 54 $ ( 1 ) $ 54 $ ( 1 )

1 unchanged sentence

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 )

1 unchanged sentence

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

The Company does not expect to be 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, 2023 or 2022.

OPENDOOR TECHNOLOGIES INC.

1 unchanged sentence

(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, 2023 are as follows (in millions):

1 unchanged sentence

Corporate-debt securities $ 54 $ 54 $ —

Certificates of deposit 9 9 —

Asset-backed securities 2 2 —

Total $ 54 $ 54 $ —

4 unchanged sentences

Total $ 20 $ 25

DERIVATIVE INSTRUMENTS

The Company uses certain types of derivative instruments in the normal course of business and the Company’s use of derivatives includes interest rate caps to manage interest rate risk, IRLCs with respect to our MLHFS, and embedded conversion options with respect to the Company’s 2019 Convertible Notes.

Derivative transactions can be measured in terms of notional amount, but this amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments.

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

Interest Rate Caps

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.

The Company’s interest rate cap position expired in November 2020.

Interest Rate Lock Commitments

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.

The interest rate risk associated with the fluctuations in market interest rates between commitment date and funding date with respect to IRLCs is mitigated as the Company operates under the best effort basis whereby at the time of commitment, the Company enters into a sales commitment with a third-party for the same prospective loan.

The fair value of interest rate lock commitments is presented in Other current assets.

The change in fair value on IRLCs is a component of Other revenue.

Embedded Conversion Options

The Company bifurcated the embedded conversion features associated with the 2019 Convertible Notes.

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

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.

The following table presents the total notional amounts and fair values for the Company’s derivatives (in millions):

Fair Value Derivatives

December 31, 2022 Asset Liability

Interest rate lock commitments $ — $ — $ —

Fair Value Derivatives

December 31, 2021 Asset Liability

Interest rate lock commitments $ 21 $ — $ —

The following table presents the net gains and losses recognized on derivatives within the respective line items in the statement of operations for the periods indicated (in millions):

Year Ended December 31,

2022 2021 2020

Derivative and warrant fair value adjustment $ — $ — $ ( 23 )

Other income, net $ — $ — $ —

During the year-ended December 31, 2023, the Company recognized $ 5 million of net unrealized losses in the consolidated statements of operations related to non-marketable equity securities held as of December 31, 2023.

No unrealized losses were recognized during the year-ended December 31, 2022 in the consolidated statements of operations related to non-marketable equity securities held as of December 31, 2022.

VARIABLE INTEREST ENTITIES

8 unchanged sentences

December 31, 2023 December 31, 2022

Cash and cash equivalents $ — $ 9

Restricted cash $ 530 $ 636

3 unchanged sentences

Total liabilities $ 2,163 $ 4,468

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

________________

1 unchanged sentence

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

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

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.

14 unchanged sentences

Revolving Facility 2018-2 $ 1,000 $ — $ — 7.49 % June 30, 2025 June 30, 2025

Revolving Facility 2018-3 1,000 — — 6.82 % September 29, 2026 September 29, 2026

Revolving Facility 2019-1 300 — — 7.34 % August 15, 2025 August 15, 2025

Revolving Facility 2019-2 550 — — 6.83 % October 3, 2025 October 2, 2026

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 — — — % 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

Term Debt Facility 2021-S1 400 — 400 3.48 % April 1, 2024 April 1, 2025

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

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

July 31, 2027

Term Debt Facility 2021-S1 100 — 100 3.48 % January 2, 2025 April 1, 2025

Term Debt Facility 2021-S2 400 — 300 3.20 % September 10, 2025 March 10, 2026

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 $ 5,525 $ — $ 1,400

26 unchanged sentences

Term Debt Facility 2021-S3 — 750 3.75 %

Term Debt Facility 2022-S1 — 250 4.07 %

Term Debt Facility 2022-S2 200 — 8.48 %

Total $ 1,377 $ 1,900

3 unchanged sentences

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

Term Debt Facility 2022-M1 — 150 10.00 %

Total $ — $ 1,150

2 unchanged sentences

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

Recourse Debt - Other Secured Borrowings:

Mortgage Financing

Repo Facility 2019-R1 $ 7 $ — 1.84 %

Total Recourse Debt $ 7 $ —

Non-Recourse Asset-backed Debt

8 unchanged sentences

As of December 31, 2023, the Company had committed borrowing capacity with respect to the Company’s non-recourse asset backed debt of $ 2.8 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.

this committed borrowing capacity is comprised of $ 650 million for senior revolving credit facilities, $ 1.4 billion for senior term debt facilities, and $ 750 million for mezzanine term debt facilities.

The Company recognized $ 9 million and $ 25 million in loss on extinguishment of debt on the consolidated statement of operations for the years ended December 31, 2023 and December 31, 2022, respectively, related to the Company’s voluntary

OPENDOOR TECHNOLOGIES INC.

1 unchanged sentence

(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.

partial early repayment of non-recourse asset-backed term debt facilities.

The loss on extinguishment of debt for the year ended December 31, 2023 was comprised of $ 4 million in pre-payment fees and $ 5 million in write-offs of associated deferred costs that were previously capitalized.

The loss on extinguishment of debt for the year ended December 31, 2022 was comprised 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

5 unchanged sentences

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 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.

Borrowings under the senior revolving credit facilities accrued interest at various floating rates based on a London Interbank Offered Rate (“LIBOR”) for certain periods prior to November 2022 or a secured overnight financing rate (“SOFR”), plus a margin that varies by facility.

Effective November 2022, all such floating rates were based on SOFR.

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

10 unchanged sentences

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 with the exception of Term Debt Facility 2022-S2, which accrues interest at a floating rate based on SOFR plus a margin.

Borrowings under the senior term debt facilities accrue interest at a fixed rate with the exception of Term Debt Facility 2022-S2, which accrued 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.

1 unchanged sentence

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.

The borrowing base for a given facility may be reduced as

OPENDOOR TECHNOLOGIES INC.

1 unchanged sentence

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

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.

Asset-backed Mezzanine Term Debt Facilities

16 unchanged sentences

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.

At December 31, 2023 and December 31, 2022, $ 275 million and $ 565 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, 2023, the Company was in compliance with all financial covenants and no event of default had occurred.

6 unchanged sentences

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.

was the guarantor with respect to the Repurchase Agreement and the obligation to repurchase loans previously

OPENDOOR TECHNOLOGIES INC.

1 unchanged sentence

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

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.

Convertible Senior Notes

12 unchanged sentences

In addition, if certain corporate events that constitute a make-whole fundamental change occur, then the conversion rate will be adjusted in accordance with the make-whole table within the Indenture.

Upon conversion, the Company may satisfy its conversion obligation by paying cash or providing a combination of cash and the Company's common stock, at the Company's election, based on the applicable conversion rate.

Upon conversion, the Company may satisfy its obligation by paying cash for the outstanding principal balance, and, a combination of cash and the Company's common stock, at the Company's election, for the remaining amount, if any, based on the applicable conversion rate.

During the year ended December 31, 2023, the Company entered into separate, privately negotiated transactions to repurchase a portion of the outstanding 2026 Notes (“Repurchased 2026 Notes”).

The holders of the Repurchased 2026 Notes exchanged $ 597 million in aggregate principal amount for aggregate payments of $ 360 million in cash for full settlement of the principal value and accrued interest on such date.

The Company accounted for the repurchase as a debt extinguishment.

Accordingly, the Company:

(i) reduced the carrying value of the Repurchased 2026 Notes by $ 597 million, (ii) reduced outstanding deferred issuance costs by $ 10 million, (iii) incurred fees of $ 2 million and (iv) recorded $ 225 million of gain on debt extinguishment.

The Company elected to leave the Capped Calls associated with the Repurchased 2026 Notes outstanding.

For the year ended December 31, 2023, total interest expense on the Company's convertible senior notes was $ 5 million, with coupon interest of $ 2 million and amortization of debt issuance costs of $ 3 million.

5 unchanged sentences

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

Following is a discussion of the fair value hierarchy and the valuation methodologies used for assets and liabilities recorded at fair value on a recurring and nonrecurring basis and for estimating fair value for financial instruments not recorded at fair value.

2 unchanged sentences

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.

Level 3 — Fair value determined using significant unobservable inputs, such as pricing models, discounted cash flows, or similar techniques.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

Estimation of Fair Value

9 unchanged sentences

Level 2 recurring fair value measurement.

Mutual fund Price is quoted given the security is traded on an exchange.

Level 1 recurring fair value measurement.

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

Level 1 recurring fair value measurement.

Mortgage loans held for sale pledged under agreements to repurchase Fair value is estimated based on observable market data including quoted market prices, deal price quotes, and sale commitments.

Level 2 recurring fair value measurement.

Other current assets

1 unchanged sentence

Level 2 recurring fair value measurement.

Interest rate lock commitments Fair value of the underlying loan based on observable quoted market prices in the secondary market and sale commitments, with adjustments for the estimated pull-through rate.

Level 2 recurring fair value measurement for fair value based on observable inputs.

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

Non-recourse asset-backed debt

2 unchanged sentences

Level 2 estimated fair value measurement.

Other secured borrowings

Loans sold under agreements to repurchase Fair value is estimated using discounted cash flows based on current lending rates for similar asset-backed financing facilities with similar terms and remaining time to maturity.

Carried at amortized cost.

Level 2 estimated fair value measurement.

Convertible senior notes Fair value is estimated using broker quotes and other observable market inputs.

1 unchanged sentence

Level 2 estimated fair value measurement.

Derivative and warrant liabilities

Sponsor Warrants Fair value is estimated using the price of the Public Warrants or their settlement value.

Level 2 recurring fair value measurement.

OPENDOOR TECHNOLOGIES INC.

1 unchanged sentence

(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.

Level 3 recurring fair value measurement.

Embedded conversion options Fair value is estimated using a lattice model incorporating the probabilities of various conversion scenarios with respect to timing and conversion features under the terms of the 2019 Convertible Notes.

Level 3 recurring fair value measurement.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

4 unchanged sentences

Equity securities 15 15 — —

Certificates of deposit 9 — 9 —

Asset-backed securities 2 — 2 —

Other current assets:

Mortgage loans held for sale 1 — 1 —

Total assets $ 69 $ 15 $ 54 $ —

2 unchanged sentences

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:

1 unchanged sentence

Total assets $ 145 $ 11 $ 134 $ —

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

Fair Value of Financial Instruments

11 unchanged sentences

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

Other secured borrowings 7 7 — 7

Convertible senior notes 959 391 — 391

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

Warrants Embedded

Conversion Option

Interest Rate Lock Commitments

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

Settlement of 2019 Convertible Notes — ( 65 ) —

Exercise of warrants ( 7 ) — —

Net change in fair value 2 23 —

Balance as of December 31, 2020 $ — $ — $ —

Additions — — 5

Originations/Terminations — — ( 5 )

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.

7 unchanged sentences

Software implementation costs 4 4

Furniture and fixtures 3 3

Office equipment 3 3

Furniture and fixtures 2 3

Leasehold improvements 2 2

18 unchanged sentences

Right-of-use assets obtained in exchange for new or acquired lease liabilities $ 1 $ 5 $ —

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.

In May 2023, the Company amended its Tempe, Arizona office lease to partially terminate the Company’s obligation with respect to a portion of the leased premises (“Partial Lease Termination”).

The Partial Lease Termination resulted in a decrease of undiscounted, future lease payments of $ 19 million.

As a result of the Partial Lease Termination, the Company remeasured its operating lease liabilities and recorded a decrease of $ 10 million to reflect the reduced lease payments and termination penalties.

The Company also recorded a decrease to right-of-use assets of $ 9 million based on the proportionate decrease in the right-of-use asset, which resulted in a gain of $ 1 million recognized in general and administrative expense on the consolidated statements of operations for the year ended December 31, 2023.

OPENDOOR TECHNOLOGIES INC.

1 unchanged sentence

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

January 2021, the Company terminated the San Francisco lease prior to the anticipated termination date of September 30, 2021, which resulted in a $ 5 million gain recognized for the year ended December 31, 2021.

See “Note 20 — Restructuring” for further discussion.

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

In January 2021, the Company terminated the San Francisco lease prior to the anticipated termination date of September 30, 2021, which resulted in a $ 5 million gain recognized for the year ended December 31, 2021.

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

4 unchanged sentences

Maturity of operating lease liabilities as of December 31, 2023 are as follows (in millions):

Thereafter 20

Total undiscounted future cash flows $ 34

2 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

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” .

For the year ended December 31, 2023 there were no additions to goodwill.

For the year ended December 31, 2022 the carrying amount of goodwill increased by $ 4 million due to acquisitions.

For more information on significant acquisitions, refer to “Note 16 — Business Acquisitions” .

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

1 unchanged sentence

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.

There was no impairment of goodwill identified for the years ended December 31, 2023 and December 31, 2021.

Intangible assets subject to amortization consisted of the following as of December 31, 2023 and 2022, respectively (in millions, except years):

19 unchanged sentences

Accrued expenses due to vendors $ 34 $ 47

Accrued property and franchise taxes 29 24

Legal contingency accrual — 18

Accrued payroll and other employee related expenses 18 21

Accrued property and franchise taxes 7 29

Accounts payable due to vendors 2 5

7 unchanged sentences

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.

Prior to the Business Combination, the Company had outstanding shares of Series A, Series B, Series C, Series C-1, Series D, Series D-1, Series E, Series E-1, and Series E-2 convertible preferred stock (collectively, “Preferred Stock”).

OPENDOOR TECHNOLOGIES INC.

1 unchanged sentence

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

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.

Immediately prior to the Business Combination, all shares of the Company’s outstanding Preferred Stock converted into a total of 195 million shares of Opendoor Labs Inc.

2 unchanged sentences

common stock converted to Opendoor Technologies Inc.

common stock with the application of the Exchange Ratio as discussed in Note 2 — Business Combinations.

common stock with the application of the Exchange Ratio.

Preferred Stock

15 unchanged sentences

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.

Pursuant to this automatic increase provision, as of December 31, 2023, 93,166,834 shares of common stock are reserved for issuance under the 2020 Plan.

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 February 8, 2023.

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

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;

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

Pursuant to this automatic increase provision, as of December 31, 2023, 17,973,904 shares of common stock are reserved for issuance under the ESPP.

OPENDOOR TECHNOLOGIES INC.

1 unchanged sentence

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

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, 2022, 493,790 shares have been issued under the ESPP.

twelve months ended December 31, 2023 and December 31, 2022, shares issued under the ESPP were 2,151,794 at a weighted average price of $ 1.16 per share and 493,790 at a weighted average price of $ 3.68 , respectively.

2022 Inducement Plan

13 unchanged sentences

Exercised ( 2,535 ) 1.07

Forfeited ( 447 ) 6.60

Expired ( 357 ) 2.87

4 unchanged sentences

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.

11 unchanged sentences

Unvested and outstanding – December 31, 2023 60,896 $ 4.05

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.

The total fair value of RSUs vested for the years ended December 31, 2023, 2022 and 2021was $ 112 million, $ 98 million, and $ 599 million, respectively.

Restricted Shares

1 unchanged sentence

The Restricted Shares vest upon satisfaction of a service condition, which generally ranges from three to four years .

A summary of the Restricted Shares activity for the year ended December 31, 2022 is as follows:

Restricted Shares

(in thousands)

Unvested – December 31, 2021 692 $ 3.91

Vested ( 623 ) 4.01

Forfeited ( 69 ) 3.02

Unvested – December 31, 2022 — $ —

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.

There were no Restricted Shares as of December 31, 2023.

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

Prior to March 2023, the Company limited the maximum number of shares to be purchased in an offering period to 1,000 shares per employee, and each offering period was six months in duration.

Beginning in March 2023, the maximum number of shares to be purchased in an offering period was increased to 10,000 shares per employee, 5,000 per purchase period, and each offering period is 12 months in duration, with two 6-month purchase periods.

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.

The ESPP also includes a reset provision for the purchase price if the stock price on the purchase date is less than the stock price on the offering date.

ESPP employee payroll contributions withheld as of December 31, 2023 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, 2023 will be used to purchase shares at the end of the current ESPP purchase period ending on February 29, 2024.

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

Year Ended December 31, 2023 Year Ended December 31, 2022

Fair value $ 0.64 - $ 2.13

$ 1.78 - $ 3.55

Volatility 101.8 % - 119.1 %

94.5 % - 101.4 %

Risk-free rate 5.06 % - 5.47 %

0.60 %- 3.34 %

Expected life (in years) 0.5 - 1.0

2 unchanged sentences

As of December 31, 2023, total estimated unrecognized compensation expense related to the ESPP was $ 1.0 million.

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

The unamortized compensation costs are expected to be recognized over the remaining term of the offering period of 0.4 years.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

Stock-based compensation expense

10 unchanged sentences

In June 2021, the market condition for two market condition awards was satisfied, which resulted in the accelerated recognition of $ 2.0 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.

During the years ended December 31, 2023 and December 31, 2022, no market conditions were satisfied.

As of December 31, 2023, there was $ 209 million of unamortized stock-based compensation costs related to unvested RSUs.

The unamortized compensation costs are expected to be recognized over a weighted-average period of approximately 1.8 years.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

Valuation of options

15 unchanged sentences

Prior to the Company’s common stock becoming publicly traded, the expected stock price volatilities were estimated based on the historical and implied volatilities of comparable publicly traded companies as the Company did not have sufficient history of trading its common stock.

Subsequent to the Company’s stock becoming publicly trade, the expected stock price volatilities were determined based on the volatilities implied by the price of the Company’s publicly traded call options in its common stock.

Subsequent to the Company’s stock becoming publicly trade, the expected stock price

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

volatilities were determined based on the volatilities implied by the price of the Company’s publicly traded call options in its common stock.

Risk-Free Interest Rate

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

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;

the 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;

14 unchanged sentences

The Sponsor Warrants are exempt from redemption if the Reference Value is at or above $ 18.00 and the Sponsor Warrants continue to be held by the original warrant holder (“Sponsor") or a permitted transferee.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

The Company may redeem the outstanding Warrants at a price of $ 0.10 per warrant if the Reference Value equals or exceeds $ 10.00 per share.

9 unchanged sentences

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.

Notes to Consolidated Financial Statements

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

Warrants to Purchase Series D Preferred Stock

On June 12, 2018, the Company issued warrants to purchase 485,262 shares of Series D Preferred Stock at a price of $ 0.006 (“Penny Warrants”).

On November 12, 2020, the Penny Warrants were exercised and the Company issued 485,262 shares of Series D Preferred Stock in exchange for proceeds of $ 3 thousand.

As of December 31, 2022 there were no Penny Warrants outstanding.

Commitment to Issue Warrants

In June 2018, the Company entered into a commitment to issue warrants (“Warrant Commitment”).

The Warrant Commitment obligates the Company to issue warrants on an annual basis until 2025 (“Issuance Date”).

The Warrant Commitment and the Company’s obligation to issue warrants was terminated upon the consummation of the Business Combination through notice provided by the Company and acknowledged by the counterparty.

On each Warrant Commitment Issuance date in June 2019 and June 2020, the Company issued warrants to purchase 121,356 shares and 242,713 shares of Series E Preferred Stock at a price of $ 5.92 per share (“Series E Warrants”).

On November 7, 2020 the Series E Warrants were exercised and the Company issued 364,069 shares of Series E in exchange for proceeds of $ 2 million.

As of December 31, 2022 there were no Series E Warrants or Warrant Commitments outstanding.

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 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.

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

Marketing Warrants

5 unchanged sentences

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.

Zillow began providing marketing services under the partnership arrangement in March 2023.

As of December 31, 2023, no warrant shares had vested.

Income before income taxes consisted of losses from domestic operations of $ 274 million, $ 1.4 billion, and $ 661 million for the years ended December 31, 2023, 2022, and 2021, respectively.

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

5 unchanged sentences

Income Tax Provision $ 1 $ 2 $ 1

For the years ended December 31, 2023, 2022, and 2021, 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.

1 unchanged sentence

(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

7 unchanged sentences

Non-deductible warrant expenses — — 0.4

Loss on convertible note exchange — — ( 2.4 )

Share-based compensation ( 6.6 ) ( 1.7 ) 7.0

4 unchanged sentences

For the years ended December 31, 2023, 2022 and 2021, the Company’s effective tax rate differs from the amount computed by applying the U.S.

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)

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

Deferred Taxes

3 unchanged sentences

Deferred tax assets:

Accrued and reserves $ 128 $ 21

Accruals and reserves

Inventory 31 34

8 unchanged sentences

Depreciation and amortization ( 7 ) ( 2 )

Goodwill — ( 1 )

Right-of-use assets ( 6 ) ( 10 )

2 unchanged sentences

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.

All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed for some portion or all of a deferred tax asset.

All available evidence, both positive

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

and negative, is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed for some portion or all of a deferred tax asset.

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 $ 718 million as of December 31, 2023 and a full valuation allowance on its net deferred tax assets of $ 664 million as of December 31, 2022.

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

The valuation allowance increased by $ 54 million and $ 288 million for 2023 and 2022, respectively primarily as a result of current year losses offset with deductibility of accrual / reserves.

As of December 31, 2023, the Company had U.S.

6 unchanged sentences

federal research tax credit carryforwards of $ 45 million that begin to expire in 2034.

The Company also had state research tax credit carryforwards of $ 26 million that begin to expire in 2029.

The Company also had state research tax credit carryforwards of $ 29 million with an indefinite carryforward period.

Section 382 of the Internal Revenue Code (the “Code”) limits the use of net operating losses and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company.

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

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.

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.

Unrecognized Tax Benefits

3 unchanged sentences

Unrecognized tax benefits as of the beginning of the year $ 20 $ 15 $ 6

Decrease related to prior year tax provisions — — ( 1 )

Increase related to current year tax provisions 2 5 9

5 unchanged sentences

To date, the Company has not recognized any interest and penalties in its consolidated statements of operations, nor has it accrued for or made payments for interest and penalties.

The Company is subject to income tax in the U.S.

and in various states.

The Company is subject to federal and state income taxes in the United States, and foreign income taxes in Canada and India.

Due to the history of net operating losses, the Company is subject to U.S.

4 unchanged sentences

tax liability will be immaterial, due to the participation exemption put in place under the Tax Act.

RELATED PARTIES

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.

The board member has significant influence with respect to the counterparty to the Warrant Commitment.

The issuance of the Warrant Commitment and Series E Warrants was in exchange for on-going advisory services that the counterparty provided to the Company.

See “Note 15 — Warrants” for further information.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

NET LOSS PER SHARE

6 unchanged sentences

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, 2023, 2022, and 2021 (in millions, except share amounts which are presented in thousands, and per share amounts):

9 unchanged sentences

2023 2022 2021

Common Stock Warrants — — 19,933

RSUs 60,896 54,547 53,446

4 unchanged sentences

Total anti-dilutive securities 70,708 67,126 68,688

BUSINESS ACQUISITIONS

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

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.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(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.

(“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.

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 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.

COMMITMENTS AND CONTINGENCIES

Interest Rate Lock Commitments

The Company entered into interest rate lock commitments with prospective borrowers whereby the Company commits to lend a certain loan amount under specific terms and interest rate to the borrower.

These commitments are treated as derivatives and are carried at fair value.

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

Lease Commitments

7 unchanged sentences

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.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

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.

2:22-cv-01717-JFM) (“Alich”) and Oakland County Voluntary Employee’s 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 lawsuits were consolidated into a single action, captioned In re Opendoor Technologies Inc.

Securities Litigation (Case No.

2:22-CV-01717-MTL).

The consolidated amended complaint names as defendants the Company, Social Capital Hedosophia Holdings Corp.

II (SCH"), certain of the Company’s current and former officers and directors and the underwriters of a securities offering the Company made in February 2021.

The complaint alleges that the Company and certain officers violated Section 10(b) of the Exchange Act and SEC Rule 10b-5, and that the Company, SCH, certain officers and directors and the underwriters violated Section 11 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 complaint asserts claims on behalf of all persons and entities that purchased, or otherwise acquired, Company common stock between December 21, 2020 and November 3, 2022 or pursuant to offering documents issued in connection with our business combination with SCH and the secondary public offering conducted by the Company in February 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.

The defendants filed motions to dismiss on June 30, 2023, which are pending before the court.

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

On March 1, 2023 and March 15, 2023, shareholder derivative lawsuits were filed in the United States District Court for the District of Arizona, captioned Carlson v.

2:23-cv-00367-GMS) and Van Dorn v.

2:23-cv-00455-DMF), respectively, which were subsequently consolidated into a single action, captioned Carlson v.

Rice (Case No.

2:23-CV-00367-GMS).

Plaintiffs voluntarily dismissed the matter on June 22, 2023, and thereafter re-filed complaints in the Court of Chancery of the State of Delaware, captioned Carlson v.

2023-0642) and Van Dorn v.

The cases have been consolidated into a single action, captioned Opendoor Technologies Inc.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

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

Stockholder Derivative Litigation (Case No.

On June 29, 2023, a shareholder derivative lawsuit was filed in the United States District Court for the District of Delaware, captioned Juul v.

1:23-cv-00705-UNA).

The complaints in each matter are based on the same facts and circumstances as In re Opendoor Technologies Inc.

Securities Litigation and name certain officers and directors of the Company as defendants.

The defendants are alleged to have violated Section 10(b) of the Exchange Act and SEC Rule 10b-5 and breached fiduciary duties.

The plaintiffs seek to maintain the derivative actions on behalf of the Company, an award of unspecified compensatory damages, an order directing the Company to reform its corporate governance and internal procedures, restitutionary relief, an award of interest and expenses, including attorneys’ fees and expert fees, and other and further relief as the court may deem just and proper.

These derivative actions have been stayed pending further developments in In re Opendoor Technologies Inc.

Securities Litigation .

On October 13, 2023, a shareholder derivative lawsuit was filed in the United States District Court for the District of Delaware, captioned Woods, et al.

Bain, et al .

1:23-cv-01158-UNA).

The complaint is based on facts and circumstances related to In re Opendoor Technologies Inc.

Securities Litigation .

The plaintiffs have brought claims against certain current and former directors and officers of the Company for breach of fiduciary duty, contribution under Sections 10(b) and 21D of the Exchange Act, SEC Rule 10b-5, violations of Section 14(a) of the Exchange Act, and SEC Rule 14a-9 promulgated thereunder.

The plaintiffs seek to maintain the derivative action on behalf of the Company, an award of unspecified compensatory damages, an order directing one of the defendants to disgorge monies allegedly obtained from certain Company stock sale, equitable relief, an award of interest and expenses, including attorneys’ fees and expert fees, and other and further relief as the court may deem just and proper.

This derivative action has been stayed pending further developments in In re Opendoor Technologies Inc.

Securities Litigation.

On October 18, 2023, a shareholder derivative lawsuit was filed in the United States District Court for the District of Arizona, captioned Gera v.

Palihapitiya, et al .

2:23-cv-02164-SMB).

The complaint is based on facts and circumstances related to In re Opendoor Technologies Inc.

Securities Litigation , and names as defendants certain current and former officers and directors of the Company and SCH Sponsor II LLC.

The complaint alleges that the defendants violated Section 14(a) of the Exchange Act, and SEC Rule 14a-9 promulgated thereunder.

The plaintiff seeks to maintain the derivative action on behalf of the Company, an award of unspecified compensatory damages, an order directing the Company to reform certain corporate governance and internal procedures, restitution, an award of cost and expenses, including attorneys’ fees and expert fees, and other and further relief as the court may deem just and proper.

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:

During the years ended December 31, 2023 and 2022, the Company initiated workforce reductions to realign its capacity with volume expectations, streamline the organization and focus its investments to support its growth plans, re-scale the business, and improve costs.

In the fourth quarter of 2023, the Company initiated two workforce reductions, impacting 120 employees, representing approximately 6 % of the Company’s workforce at that time.

The Company will provide severance and other termination benefits (“Post-Employment Benefits”) to impacted employees for an expected total expense of approximately $ 4 million, of which $ 1 million was paid out through December 31, 2023.

On April 18, 2023, the Company announced a workforce reduction of approximately 560 employees, representing approximately 22 % of the Company’s workforce at that time and primarily impacting volume-based roles.

The Company provided Post-Employment Benefits to impacted employees for a total expense of approximately $ 10 million.

Payments related to this workforce reduction were substantially completed as of December 31, 2023.

In November 2022, the Company initiated a workforce reduction of 550 employees, which 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.

The Company provided Post-Employment Benefits to impacted employees and incurred costs to wind down mortgage services for a total expense of $ 17 million.

Payments related to this workforce reduction were substantially completed as of December 31, 2022.

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.

As a result, for the year ended December 31, 2020, the Company recorded $ 11 million of restructuring charges for employee termination benefits.

All employee termination benefits were paid prior to December 31, 2020.

Additionally, for the year ended December 31, 2020, the Company incurred $ 18 million of costs related to the exiting of certain non-cancelable leases with no future benefits to the Company.

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.

As of December 31, 2023, the remaining $ 3 million is included within Accounts payable and other accrued expenses in the Consolidated balance sheets.

OPENDOOR TECHNOLOGIES INC.

1 unchanged sentence

(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.

The following table presents the activity of the restructuring liability (in millions):

Balance-December 31, 2021

Additions charged to expense 17

Cash payments ( 13 )

Balance-December 31, 2022 4

Additions charged to expense 14

Cash payments ( 15 )

Balance-December 31, 2023

SUBSEQUENT EVENTS

36 unchanged sentences

Warrant fair value adjustment — — 12

Gain on extinguishment of debt

Interest expense ( 5 ) ( 8 ) ( 2 )

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

Income (loss) before income taxes

Income tax expense — — —

9 unchanged sentences

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:

$ ( 275 ) $ ( 1,353 ) $ ( 662 )

Adjustments to reconcile net loss to cash, cash equivalents used in operating activities:

Earnings of subsidiaries 487 1,338 665

1 unchanged sentence

Warrant fair value adjustment — — ( 12 )

Gain on early extinguishment of debt

Interest payable ( 1 ) — 1

8 unchanged sentences

Proceeds from issuance of convertible senior notes — — 953

Repurchase of convertible senior notes

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

2 unchanged sentences

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 )

Net cash provided by financing activities 6 1,728 971

Net cash (used in) provided by financing activities

( 357 ) 6 1,728

NET INCREASE IN CASH AND CASH EQUIVALENTS — — —

13 unchanged sentences

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.

1 unchanged sentence

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