Opendoor co-founder Keith Rabois is back with a brutal assessment: the PropTech giant needs to slash 85% of its workforce to survive. Speaking as the company's new chairman following this week's CEO shake-up, Rabois called the 1,400-person team 'bloated' and criticized remote work policies that he says destroyed the company culture.
Opendoor just got a reality check that sent shockwaves through PropTech. Co-founder Keith Rabois doesn't mince words about what went wrong at the company he helped create - and his fix involves cutting 85% of the workforce.
"There's 1,400 employees at Opendoor. I don't know what most of them do. We don't need more than 200 of them," Rabois told CNBC's Squawk on the Street on Friday, just days after being named chairman.
The timing isn't coincidental. Wednesday's appointment of former Shopify executive Kaz Nejatian as CEO came after investor pressure forced out Carrie Wheeler last month. The leadership shuffle also brings back original CEO Eric Wu to the board, completing what looks like a founders' reunion aimed at saving the struggling real estate platform.
Markets initially loved the news - Opendoor shares exploded 78% Thursday before reality set in Friday with a 12% drop. Still, the stock remains up nearly 500% this year, thanks largely to retail investors who rallied behind hedge fund manager Eric Jackson's bullish calls on the company.
But Rabois isn't celebrating the stock surge. He's focused on what he calls a "broken" culture that developed during the company's remote work phase. "These people were working remotely. That doesn't work," he said, emphasizing that Opendoor was "founded on the principle of innovation and working together in person."
The chairman's critique goes deeper than just location preferences. He specifically called out the company's diversity, equity and inclusion initiatives, saying "We're gonna fix all that." It's a stark departure from the tech industry's usual messaging and signals a dramatic cultural shift ahead.
The numbers tell the story of why such drastic measures might be necessary. Opendoor's business model - using technology to buy and flip homes while pocketing the spread - remains fundamentally challenged. The company continues burning cash with razor-thin margins and limited growth prospects, according to CNBC's analysis.
Nothing has fundamentally improved since Jackson began promoting the stock in July. The PropTech sector has struggled as higher interest rates squeezed real estate transactions, making Opendoor's inventory-heavy model particularly vulnerable.
Rabois claims he has a "high level view of the strategy" needed to transform the company, with workforce reductions at the center of addressing the cash burn problem. The scale he's proposing would rank among the most aggressive cuts in recent tech history - far exceeding the 10-20% reductions seen at companies like Meta and Amazon during the 2022-2023 downsizing wave.
For Shopify, losing Nejatian represents another executive departure as the e-commerce platform continues its own restructuring efforts. Nejatian served as COO and was instrumental in the company's international expansion before taking on various strategic roles.
The broader PropTech industry will be watching closely to see if Rabois can execute his turnaround vision. Similar platforms like Zillow Instant Offers already retreated from the home-flipping business after massive losses, suggesting the model's fundamental challenges may be harder to solve than workforce optimization.
Investors seem torn between optimism about the leadership changes and skepticism about the underlying business. The stock's wild swings this week reflect that uncertainty, with retail traders betting on a dramatic transformation while institutional investors likely remain cautious about the execution risks ahead.
Rabois is betting that radical surgery can save Opendoor from its cash-burning spiral, but the 85% workforce reduction plan represents an enormous execution risk. While investors initially cheered the leadership changes, the real test comes in whether this founder-led team can actually fix the fundamental economics of automated home flipping - something that has challenged every company that's tried it. The next few quarters will determine if this is a genuine turnaround story or just another meme stock moment.
