The GameStop Corp. Class A (GME.US) of the real estate industry? Opendoor (OPEN.US) skyrocketed 460%, sparking a new wave of meme stock madness.

In 2020, Opendoor Technologies Inc. (OPEN.US), supported by "SPAC King" Chamath Palihapitiya, was a typical representative of the special purpose acquisition company (SPAC) bubble. Now, after a surge driven by retail investors (which cooled off on Tuesday), this technology-driven real estate trading platform is seen as a symbol of the new wave of Meme stock frenzy. It should be noted that there has been no significant improvement in the core business of Opendoor (i.e. the "instant buying" iBuying model) in the real estate market. Current mortgage rates and housing prices remain high, with both buyers and sellers facing affordability challenges. Just a short while ago, the company's stock price was consistently below $1, facing the risk of delisting. However, since hitting a low of 51 cents on June 25, despite a downturn in the housing market, the collective power of retail investors on social media has driven its stock price up over 460%. The stock surged 24% on Tuesday before closing at $2.88, down more than 10% from the previous day. Market observers have been surprised by this sudden frenzy, with many characteristics mirroring the skyrocketing of GameStop Corp. Class A (GME.US) and AMC (AMC.US) in 2021. Eric Jackson, founder of Toronto hedge fund EMJ Capital, started to promote the stock online earlier this month, becoming one of the catalysts of this rally. Business Model Analysis As of the end of March, Opendoor owned over 7,000 residential properties, valued at around $2.4 billion. At the end of last year, its business covered 50 markets, including hotspots like Phoenix, Atlanta, and other sunbelt regions. When the company was founded in 2014, it targeted a pain point in the U.S. real estate market: most buyers need to sell their current property before buying a new one, leading to a chain of transactions. Their solution was to provide quick cash offers through algorithms, helping sellers break free from the constraints of the transaction chain. After simple repairs, the company would list the properties for sale, earning service fees from sellers and profits from the price difference. During the pandemic in 2020, low interest rates and rising housing prices drove its stock to a historical closing high of $35.88 in February 2021. This boom attracted established players like Zillow (Z) and Redfin, who quickly followed suit, and rival Offerpad Solutions Inc. (OPAD.US) went public through a SPAC merger. However, industry risks soon became apparent. By the end of 2021, Zillow had to shut down its iBuying business after misjudging the pace of housing price growth and suffering losses from overpriced property acquisitions. This painful lesson foreshadowed the challenges in the entire tech-driven real estate speculation sector. With the Fed's interest rate hikes in 2022, falling housing prices forced iBuyers to clear their inventory at a loss. Reports from that time indicated that Opendoor incurred losses in 42% of transactions in August. Subsequently, the company adopted a more conservative pricing strategy, leading to a sharp decline in purchase volume and revenue - in the first quarter of this year, they only purchased around 3,600 homes, a significant decrease from the peak of 15,000 homes in the third quarter of 2021. Recent Trading Trends As the S&P 500 index reaches new highs, Meme stocks have become active again recently. Kohl's (KSS.US) saw its stock price double on Tuesday due to retail investors, QuantumScape (QS.US) rose over 200% in the past month, and Bit Mining Ltd. (BTCM.US) increased by 82% during the same period. Opendoor has also benefited from this round of frenzy, with a surge in trading volume and stock price. On Tuesday, around 1 billion shares were traded, more than 780% of the three-month average volume, far exceeding NVIDIA Corporation's (NVDA.US) daily volume of 184 million shares. Historical experience shows that companies like GameStop Corp. Class A have previously used an At-The-Market (ATM) equity issuance plan to finance during periods of retail enthusiasm. Regulatory filings show that Opendoor can issue up to $200 million worth of stock through ATM offerings. The company's representatives have not responded to requests for comments. As for the future direction, some observers question whether traders truly understand the company, or are driven by "Fear of Missing Out" (FOMO). Max Gokhm, Deputy Chief Investment Officer of Franklin Templeton Investment Solutions, points out, "Investing in Meme stocks is more like following the herd behavior of social media opinion leaders, essentially similar to buying roller coaster tickets."