But Social Capital Founder and CEO Chamath Palihapitiya, a former Facebook executive, has had to defend the agreement after critics questioned the $60 million shares he and his partner would receive, Financial Times (FT) reports.
Palihapitiya and U.K. investor Ian Osborne are co-founders of the blank-check company or special purpose acquisition company (SPAC), one of the many they run. Now, they are buying into the property group with $82.8 million of founder shares in Opendoor, larger than the usual amount of what is usually called the “promote,” FT reported.
Palihapitiya, in an interview with FT, questioned a perceived double standard between what it's OK for banks to do versus how new companies are supposed to act.
“I just don’t understand why all of a sudden it’s OK for banks to make money, but it’s not OK for other people to make money,” he said, according to FT.
Social Capital Hedosophia II will infuse Opendoor with a $1 billion cash injection. That includes a $414 million fundraiser from April of this year. The company also secured $600 million from other backers, which include BlackRock, the Healthcare of Ontario Pension Plan, existing Opendoor investors and Palihapitiya himself, FT reported.
Opendoor, founded in 2014, focuses on letting consumers buy and sell homes online. The selling point is the ability to do away with the process of dealing with agents, finding buyers, making repairs and putting on open houses and negotiations, although critics say the homes sell for less than they're worth online.
The company has struggled during the pandemic, but last year raised $300 million, giving it a valuation of $3.8 billion.
SPACs like Palihapitiya's Social Capital have become popular in recent years. Such companies have been responsible for raising tens of billions this year, FT reported.