Opendoor has a plan to complicate life for short sellers betting against the meme stock

• Opendoor stock dropped last week after lackluster earnings.

• But the earnings also revealed a plan that could make things tough for short sellers.

• CEO Kaz Nejatian said on the call that he liked the idea of causing pain to shorts.

Opendoor Technologies has a plan to make life difficult for short sellers betting against its stock.

The real estate iBuying company reported third-quarter earnings last Thursday, revealing mixed results and a cautious tone from management that sparked a sell-off in the stock.

Opendoor shot higher in Monday’s session, though, with the stock up 22% late in the day. A jump in risk appetite has helped, as markets cheer the likely end of the government shutdown, but investors are also excited about a plan to reward shareholders and complicate things for short sellers.

When Opendoor reported earnings last week, much of the focus was on the results themselves. But CEO Kaz Nejatian revealed later in earnings call that every investor as of November 18 will receive three tradable warrants for every 30 shares they own, with exercise prices of $9, $13, and $17 and expiration dates in November 2026.

Nejatian wasn’t shy about what he saw as a positive consequence of the move.

“I’ll admit it, it gives me just a bit of joy that this will totally ruin the night of a few short sellers,” Nejatian said during the earnings call. “I generally do not understand why these people do what they do. It just seems deeply boring and just bad for the soul.”

The warrants function like call options, meaning they offer upside if Opendoor stock rises. When Opendoor pays the dividend, short sellers will have to deliver the warrants to the original lenders they borrowed the shares from. Some could close out positions rather than deal with the headache, buying back the stock and pushing the price up.

Opendoor stock is still a fairly popular target for short-sellers, with short interest accounting for 22.5% of float. While the stock has risen almost 400% year-to-date on retail-driven meme stock hype, its uncertain outlook continues to prompt speculation that the gains might be short-lived.

Retail investors, who often portray short sellers as archenemies, cheered the move in discussions on forums around the internet. However, others see it as potentially a stunt to drum up near-term excitement while longer-term problems persist.

“It is a pretty universal signal when a company is preoccupied and speaking publicly about short sellers, not focused on their business, that this is not going to go well,” Cory Johnson, chief market strategist at Epistrophy Capital Research, told Business Insider. “Historically, it has always been that when a CEO is obsessed with short sellers and talking about them publicly, there’s something going wrong at that company.”

Johnson said that the only way to achieve sustainable share price growth is to deliver great financial results, not by a plan engineered to “punish” some investors.

“A dialog with short sellers, an honest dialog from an honest company to convince someone that your business is going to go well, will create buying in the stock, and it will get the shorts out of the stock,” he stated.

Opendoor did not respond to a request for comment.

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