At FinancialMediaGuide, we see the reaction to Citron Research’s post not only as a short-term blow to Opendoor stock, but also as an indicator of the underlying problems with iBuying’s business model. The company’s shares trimmed their gains from 7% to 3% on Friday after harsh criticism of the platform. At Prime Focus, we note that stories like these highlight the vulnerability of models where capital and margins are in direct conflict.
Citron Research called Opendoor “stock advertising and a scientific experiment in burning money.” The report pointed out that the business faces three key barriers:
– the lack of real application of AI to improve margins;
– the low-margin structure of the housing market, where a 1-2% swing can wipe out profits;
– the capital-intensive nature of the model, which requires holding billions of dollars in inventory with no guarantee of resale.
FinancialMediaGuide commentary: It is important for investors to remember that iBuying was positioned from the very beginning as an attempt to “digitize” the real estate market. But in practice, it turned out to be hostage to the same risks as classic development, only with even more stringent restrictions on profitability.
Citron also recalled the failure of Zillow, which had already tried to implement a similar strategy. The pressure is intensified by competition, and Opendoor, according to Citron, may repeat this scenario. An additional risk is the possible dilution of shareholders’ stake in the context of constant cash burning.
FinancialMediaGuide view: We see this case as a reflection of a broader dynamic: investors are no longer believing in models that require gigantic capital to support a low-margin business. Even though Opendoor shares retained some of their morning growth, this is more a reflection of speculative interest than confidence in the long term.
Conclusion
The Opendoor story demonstrates the limits of experimentation in the real estate market. When tech packaging fails to address fundamental margin and capital issues, the sustainability of the business becomes questionable. For investors, the takeaway message is clear: without a rethink, iBuying will remain a “cash-burning experiment.” And it’s examples like these that we highlight at Prime Focus as warning signs for the market.
