Why Opendoor Technologies Stock Is Plummeting Today

Key Points

• Opendoor announced yesterday that it had postponed its vote on carrying out a reverse stock split until Aug. 27.

• The company's share price saw massive gains earlier this month thanks to meme-stock momentum, but the meme trade seems to be losing steam.

• Opendoor could use its recent stock gains as an opportunity to raise funds, but selling new stock could send its share price lower.

• 10 stocks we like better than Opendoor Technologies ›

Opendoor Technologies (NASDAQ: OPEN) stock is getting hit with a surge of selling pressures in Tuesday's trading. The real estate specialist's share price was down 14.1% as of 11:15 a.m. ET amid very little movement in the broader market. The stock had been down as much as 15% earlier in trading.

Opendoor announced yesterday that it was delaying a shareholder meeting to vote on a reverse stock split until Aug. 27. The company had been scheduled to vote on the matter yesterday, but it postponed the vote because the company's recent valuation surge helped push the company's share price above the $1 threshold needed to continue trading on the Nasdaq exchange.

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Opendoor stock sinks following reverse split postponement

Opendoor saw a massive rally earlier this month after Eric Jackson, who founded and manages EMJ Capital, said that he was bullish on the stock. His support for the company as an investment helped Opendoor achieve meme-stock status, and retail traders rushed in to buy shares in hopes of scoring big gains in a short period of time. Depending on when they bought, some investors had the opportunity to score huge profits trading the stock -- but the meme momentum now seems to be losing some steam.

What's next for Opendoor?

While not needing to conduct a reverse stock split to remain in compliance with Nasdaq requirements would be a positive development, some investors may be worried that the company is gearing up to sell new shares soon. Selling new shares at an elevated valuation level could help Opendoor improve its balance sheet -- but there's a catch.

Issuing new stock in order to raise funds could send Opendoor's share price significantly lower -- potentially pushing it much closer to the $1-per-share threshold. Raising funds through a stock sale could significantly improve the company's financial footing, but the stage looks set for Opendoor to continue being highly volatile in the near term.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.