💥Bad Offer(Pad)💥
One to Watch: Offerpad Solutions Inc. ($OPAD). Plus: a 23andMe Update.
🏠One to Watch: Offerpad Solutions Inc. ($OPAD)🏠
Tempe, Arizona-based Offerpad Solution Inc. ($OPAD) (the “company”) is “… a leading tech-enabled platform for residential real estate…” “… with a highly efficient business model …” looking to generate returns in the uber “… fragmented and non-integrated” $1.9t US residential real estate market. A market the company believes is “… ripe for disruption.”
If the combination of those buzzwords and the fact the company has a ticker weren’t a dead giveaway, indeed, we have yet another deSPAC sh*tco circling the drain.
Launched in ‘15, this potential future-bankruptcy-filer became a public problem on September 2, 2021 by merging with former-Zillow ($Z)-CEO-Spencer Rascoff-led Supernova Partners Acquisition Company — the acronym of which we just can’t help but notice spells, 😒, SPAC — in a deal that valued the enterprise at an incredible ~$2.4b.
Well, “incredible” for everyone but, lol, the SPAC’s investors. The unmistakable odor of a turd had already wafted well up into the market’s nostrils, so after one day later, their $10/share had become $8.63. And despite showing the briefest flicker of hope — working its way up over the next couple of weeks to a record $13.63 high on September 17, 2021 — the stock has been a steaming pile of cow dung residing on the New York Stock Exchange ($NYSE) ever since.
Don’t be fooled by that current “$0.97” either. Barely making one full circle around the sun as a pubco, in November ‘23, the company received its first notice of noncompliance with the NYSE’s $1 per share minimum. To stave off being delisted, on June 8, 2023, the company effected a 15:1 reverse stock split, which *breaks out trusty calculator* means the current price is an apples-to-apples 99.4%-value-losing ~6.5c. It also means the company’s market cap currently hovers around a pathetic $26.7mm.
Anyway, let’s jump into what the company “does.” Y’all ever seen one of these floating around your neighborhood?
If not, congrats on being rich, but play along. Take that concept and, uh, drop it into an app and you’ve got what the market calls an “instant buyer” or “ibuyer” situation akin to another, better known (and similarly stank) player in the space, Opendoor Technologies Inc. ($OPEN) ($438mm market cap, down ~95% from its much-hyped-and-Chamath-promoted ZIRP-era deSPAC once valued at $4.8b). Have the mental picture ready? Good. Because that’s basically it.
For FYs 22, ‘23, and ‘24, buying houses for (borrowed) cash, doing modest renovations — we mean covering up sh*tty tiling with equally sh*tty flooring, installing recessed lighting everywhere, and cranking the brightness setting on staged pics to 11 …
… – and flipping the homes (in minutes and without “major inconvenience”!) to some other sucker buyer generated over 97% of the company’s revenues.
The other 3% — all dumped into an “Other” bucket in the company’s financials — are natural ancillaries of the primary biz: pairing other companies and homeowners with the company’s “renovators,” directly connecting buyers and sellers (suggesting there’s sh*t even this company didn’t want to own), and allowing partner agents to list their own acquired properties for resale, all for a fee.*
Oh, and that revenue? Whoa boy.
In FY’21 and fueled by a cocktail of COVID and a ZIRP environment, the company exceeded its own expectations …
… even after they were quickly revised upward …
…and posted a best-ever $2.1b in revenue, up YoY nearly double from ‘20s $1.1b, from 6,373 home sales, which generated measly net income of $6.5mm. The first and only year it ended up in the black.
Let’s pause on that for a moment.
In its revised August ‘21 SPAC investor presentation, the company actually projected ‘21 revenue of $1.7-$1.85b (up from $1.4b weeks earlier), which makes this the rare instance when a SPAC’s projections, even after the upward revision, proved … gulp … conservative …? Color us mind blown, 🤯.
In ‘22, the growth story continued, with revenue again nearly doubling to ~$4b on the back of a staggering 10,635 home sales. This, too, dramatically exceeded the company’s own projections (by $1.6b on ~1.1k more home sales). But – ⚡️BUT!⚡️ – cost of sales and operating expenses outpaced, so the company ended up losing $127.3mm before taking another $21mm in interest expenses into account. Turns out those 👆profit projections in the first graph were not so conservative after all, 🤷♀️.
By ‘23, Jerome Powell had hiked rates, the populace had been freed from its COVID confines, and the buying spree — both in terms of homes the company bought and, in turn, customers purchased — trailed off. The company’s sales declined to 3,674 and 2,707 homes in ‘23 and ‘24. To put this dramatic turn of events in perspective, the company projected 14,987 homes sold for ‘23. Revenue fell off the proverbial cliff to ~$1.3b in ‘23 (versus $3.9b projected) and kept falling in ‘24 to ~$919mm. But, hey, if you’re in need of a silver lining, losses were tempered too; the company only torched $117.2mm in ‘23 and $62.2mm in ‘24. Which brings us to the company’s ultimate issue: variable costs. They’re …
… and therefore, contribution margin is abysmal, averaging 4.3% from ‘20 through ‘24, with a standout (👏) (1.1)% in ‘23. With margins like that, and setting aside rate-and-pandemic-driven mania, the company can’t sell enough houses to make a profitable buck.
‘25 hasn’t been kinder.
On April 10, 2025, the NYSE delivered a notice to the company that it risked being delisted again because its market cap had fallen below $50mm. Something that, 😬, a reverse stock split can’t solve (though the company insists it will present the NYSE with a business plan that will allow it to maintain its listing, 🙄).
On May 5, 2025, the company filed its 1Q’25 10-Q and … well … see for yourself:
Revenue ⬇️ 43.6% YoY for the quarter (and nearly 10% sequentially), from $285.4mm to $160.7mm, the company posted a $15mm net loss, and though it acquired more homes than any quarter since 2Q’24, it sold far fewer than it had in any quarter in the TTM. The company entered April ‘25 with $30.6mm in unrestricted cash on hand, down $12.2mm from December 31, 2024.
Which brings us to the cap stack:
As you can see, as of the end of 1Q’25, the company had ~$211mm of debt outstanding, most of which is collateralized by the company’s real estate inventory, against a then-$233mm in commitments and a total borrowing capacity of ~$1b. The company typically rolls over these facilities on a yearly basis as it clears through inventory collateral. What’s notable, though, is the interest rate on these facilities. In FY’22, just for illustration, the weighted average interest rate was roughly around 4.5%. Now, though:
That alone is a major driver of the company’s contribution margin decline.
But let’s go back to the debt for a minute because the situation is getting dire. Following the release of its 10-Q, in May and June ‘25, the company announced it had entered into three debt facility amendments. The first and second — affecting the company’s senior secured and mezz facilities with related-party LL Funds, LLC** — (i) kicked out senior maturities from March ‘25 to August 31, 2025, (ii) provided ambiguous covenant relief and otherwise aligned the docs with the company’s other, non-related-party debt facilities, and (iii) reduced (a) the revolving senior loan’s commitments from $30mm to ~$25.5mm, (b) the revolving mezz’s commitments from $8mm to ~$6.8mm, and (c) the mezz facility’s borrowing capacity from $70mm to $35mm and corresponding commitments from $45mm to ~$13.1mm. The third — with respect to the company’s facility with Citibank, N.A ($C) aka “senior financial institution 1” — went significantly further, reducing commitments from $150mm to … *brace yourself* … $25mm. When all three are considered in tandem, aggregate lender commitments dropped ~69% to ~$71.7mm.
A restructuring seems all but inevitable. Here’s CFO Peter Knag on the 1Q’25 earnings call:
“Through a relentless focus on cost efficiency, we’ve taken significant steps towards profitability. Over the past twenty four months, we have reduced annual operating expenses by approximately $115,000,000 and we continue to make strong progress in 2025 by identifying and removing additional costs.”
Driven by slashing advertising and headcount, falling from ~900 employees in December ‘22 to ~200 two years later. He goes on:
“You should anticipate further improvements based on the actions we executed in April and those still underway as we maintain our disciplined focus on cost and process efficiencies. We will provide additional updates on these efforts next quarter.”
Curious about those April actions? Like, what they are? Yeah, so was JPMorgan Chase & Co. ($JPM) analyst Dave Lee. Pete declined to spill the beans for now, punting the revelation to next quarter. We’re sure they’ll be worth the wait. Anyway, back to you, Mr. Knag:
“...we are making continued progress on capital market opportunities beyond our core asset-backed facilities. With active discussions underway across multiple groups, we remain cautiously optimistic that these conversations will continue to advance. Additionally, to be prepared for the possibility that we do not bring in new capital, we are developing plans for restructuring alternatives and options. We expect these to include more significant cost reductions, product and operational changes focused on reductions in working capital requirements and other actions to enhance the preservation of cash.”
Given the company’s circumstances, that’s probably the absolute least he could get away with, but if you were wondering, no, the company’s board doesn’t have any restructuring-focused directors yet.*** Although there’s a good chance that changes as it approaches the bottom of the bowl and hands are forced. Stay tuned.
*Because the “Other” business segments are inherently “asset-light,” they’ve generated an outsized piece of the company’s consolidated gross profits; 5%, 16%, and 11% for ‘22, ‘23, and ‘24.
**LL Funds LLC (“LL Funds”), an alternative asset manager, was an early mover with the company, having lent to it since ‘16 (including ~$55.7mm of the company’s current debt) and owning about half of its stock.
***LL Funds-founder Roberto Sella has been on the company’s board since ‘21.
⚡️Announcement⚡️
We love feedback. That’s it, that’s the announcement. If you want to let us know how we’re doing — good or bad (we’re used to be called morons … well, Johnny is) — feel free to click that heart 👆, leave a comment or email us at petition@petition11.com. We recently got an email with the subject line “you guys are amazing” followed by this day-making message:
We appreciate you, our loyal readers, 🙏.
⚡️Update: 23andMe Holding Co. ($ME)⚡️
On June 13, 2025, 23andMe Holding Co. ($ME) and 11 affiliates (collectively, the “debtors”) held a final round of bidding for their assets, necessitated by a botched auction process that resulted in both subsequent bids by and litigation from Anne Wojcicki’s TTAM Research Institute’s (“TTAM”).
And because a Paul, Weiss, Rifkind, Wharton & Garrison LLP partner had already blundered by disclosing TTAM’s then-secret $305mm purchase price in open court, that bid kicked it off.
That’s, um, where the bidding ended too. The action never got going because the debtors’ other potential suitor, Regeneron Pharmaceuticals, Inc. ($REGN), didn’t bother to top TTAM. Worse, REGN’s prior, auction-winning $256mm bid is done-zo altogether and, in its place, REGN has substituted a … womp womp … 41% lower, $151mm back-up bid.**
Not quite the competitive process the debtors had been envisioning. Or, for that matter, equity holders either. Once markets opened after the news ☝️broke, ME’s share price nosedived:
… and the debtors’ market cap sank to land at ~$109mm.
But if things go well for the debtors at today’s 9am CT sale hearing, that value is still a sh*t ton more than the 41c Ms. Wojicki offered back in March and ought to be fairly locked in. And by “if things go well,” we mean the debtors successfully beat back a whole host of state objections that argue the sale can’t be approved because the debtors haven’t obtained the affirmative consent of each and every ME customer.***
On the debtors’ chances, the PETITION team is optimistic. To be blunt, the states’ objections don’t amount to much aside from policy-oriented gibberish that, intentionally or unintentionally, misunderstand section 363’s requirements, and, as the debtors and TTAM each point out, preemption ought to take care of any federal-bankruptcy-interfering state law. Therefore, we’d bet that, after putting up with what’ll probably be a couple hours of taxpayer-funded nonsense, Judge Walsh won’t have any problem overruling the states, approving the sale, and putting the debtors on a value-distributing liquidation path.****
Well, on that path save one more June stopover in court. On June 12, 2025, the ad hoc group of equity holders (the “ad hoc group”), represented by Brown Rudnick LLP, filed a motion to expedite consideration of its motion to appoint an official equity committee, which’ll be taken up next week on June 24, 2025. What’s the emergency? Good question; here’s the official committee of unsecured creditors (the “UCC”):
“The Motion to Expedite is devoid of any showing of cause that would justify expediting the Equity Committee Motion. That is because no cause exists. The Moving Shareholders will not be prejudiced in any way if the Equity Committee Motion is heard on a standard and properly noticed schedule.”
In any event, folks can bicker about it next week. Until then, all attention is on TTAM.
*In the event the sale hearing doesn’t end the same day, the court will pick it back up on June 20, 2025.
**Per The Wall Street Journal:
“In a statement Regeneron said that it declined to submit a higher bid based on ‘its assessment of 23andMe’s remaining value.’”
***The debtors will also have to address standard cure objections, but there’s not anything exciting there. Ms. Wojicki’s pal, Larry Ellison, still had Oracle Corp. ($ORCL) file, lol, its boilerplate objection.
****If, however, the sale doesn’t get a judicial thumbs-up, the debtors and TTAM have a solution. They agreed, through the purchase agreement, to pivot to a chapter 11 plan that effectuates the same outcome, with a confirmation hearing to be held “… no later than September 15, 2025.”
📚Resources📚
We have compiled a list of a$$-kicking resources on the topics of restructuring, tech, finance, investing, and disruption. 💥You can find it here💥.
📤 Notice📤
John Ramirez (Counsel) joined Eversheds Sutherland from Kelley Drye & Warren LLP.
🍾Congratulations to…🍾
AlixPartners LLP (David MacGreevey) for securing the financial advisor mandate on behalf of the official committee of unsecured creditors in the Ascend Performance Materials Holdings Inc. chapter 11 bankruptcy cases.
Cassel Salpeter & Co. LLC (Philip Cassel) for securing the investment banker mandate for the debtors in the CHG US Holdings LLC chapter 11 bankruptcy cases.
Ducera Partners LLC (Michael Genereux) for securing the investment banker mandate on behalf of the official committee of unsecured creditors in the Ascend Performance Materials Holdings Inc. chapter 11 bankruptcy cases.
Greenhill & Co. LLC (Jakub Mleczko) for securing the investment banker mandate for the debtors in the Leisure Investments Holdings LLC chapter 11 bankruptcy cases.