Opendoor surges on decision to forgo reverse stock split

Shares of Opendoor Technologies are surging on Monday after the online real estate company announced after the close on Friday that it had received notice from the Nasdaq that it is once again in compliance with requirements that it close above $1 per share for 10 consecutive sessions. As such, it is not in danger of being delisted.

In light of this, management is canceling a special meeting of shareholders — which had previously been postponed — where they would have sought approval for a reverse stock split to push the nominal value of the stock price higher. On some level, this represents a vote of confidence from management that the stock will not return to trading for less than $1.

The core of why this really matters is that Opendoor remains, for now, a flows story. That might change with more evidence of a fundamental turnaround in its business (and we’ll get earnings tomorrow after the close for a spot check on that!).

But the basic story of why it’s gone up a lot is because people bought a lot of it, with much of this exposure gained in the options market.

And it’s a lot cheaper to access embedded leverage in the options market through relatively close-to-the-money call options when the nominal stock price is lower versus when it’s higher. So, for retail traders, the cost of call options will remain optically lower, in dollar terms, than it otherwise would have been in the event of a reverse share split.