Offerpad Cutting More Jobs in Conjunction with $90M Private Raise
The struggling iBuyer confirms the company has laid off an unspecified number of employees, with more details coming on the Feb. 22 fourth-quarter earnings call.
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As sometimes happens when money-losing companies raise funds, it turns out Offerpad’s plan to raise $90 million in a private placement with existing investors will also entail some painful cost-cutting in the form of layoffs.
In announcing the new funding Wednesday, the struggling iBuyer made no mention that it was also laying off employees. But at least four Offerpad employees — including a product manager and three software engineers — posted public notices on LinkedIn Wednesday that they’d been laid off and were looking for work.
“Along with many others at Offerpad that were laid off today I’m officially in the market for a role and would appreciate your support,” Senior Software Engineer Christopher Straughn said in a public LinkedIn post.
An Offerpad spokesperson confirmed that the company has laid off an unspecified number of employees with more details coming on the company’s fourth-quarter earnings call on Feb. 22.
“Recent macroeconomic factors have slowed the trajectory of growth in the real estate industry,” an Offerpad spokesperson told Inman via email. “Like many others, we are adjusting the size of our operations to align with the current state of the market. Unfortunately, some of our team members have been impacted. We have provided severance packages and extended health care coverage to help support those individuals through this difficult transition.”
Offerpad had previously laid off about 7 percent of its workforce in September, a move that left the company’s headcount down about 12 percent from peak employment due to a hiring pause instituted earlier in the 2022 year, CFO Mike Burnett said on the company’s third-quarter earnings call.
Rival iBuyer Opendoor laid off 18 percent of its workforce, or about 550 people, in November. Last year, power buyer Knock cut nearly half of its workforce, or about 115 workers, in conjunction with a $220 million funding raise from private investors.
Offerpad’s agreement to raise $90 million from existing investors including CEO Brian Bair, Roberto Sella and First American Financial Corp, gives the company an additional six months to a year of operations at its current cash burn rate, analysts at Keefe, Bruyette & Woods (KBW) led by Ryan Tomasello wrote in a note to clients.
“Our current model implies that Offerpad has only four to six quarters of remaining cash runway based on an average quarterly cash burn rate of $30-40 million through year-end 2023,” KBW analysts said. “As a result, the $90 million private placement extends the company’s estimated cash runway by two to four quarters.”
On a November earnings call, Bair outlined the company’s strategy to negotiate a challenging “in-between” phase of the market, where buyers and sellers are on the fence.
Sellers “are holding on to the idea their home is still worth what it was six months ago,” Bair said. “And buyers aren’t willing to engage at those prices. This in-between phase is the most challenging period for the entire real estate market, including iBuyers.”
Zillow, once one of the biggest players in iBuying, has exited the business altogether. But Offerpad plans to soldier on, envisioning iBuying as an attractive option for sellers coping with a buyer’s market.
“When sellers can’t go from listing to pending in days, and instead it takes weeks or months, iBuying becomes even more attractive,” Bair said in November. “And if we are smart about how we underwrite homes in the market, there is an opportunity for enormous growth.”
In the meantime, Offerpad executives acknowledge that they’ll have to sell many of the homes they’ve already purchased at a loss. In the short term, Offerpad plans to pivot to providing “asset light” services that streamline transactions and facilitate sales directly to buyers, rather than flipping houses itself.
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