Struggling iBuyer has confirmed that it has laid off an unspecified number of employees, details of which will be announced during its fourth-quarter earnings call on February 22.
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As sometimes happens when money-losing companies raise money, Offerpad’s plans to raise $90 million in a private placement with existing investors also turned out to come with painful cost savings in the form of layoffs.
The struggling iBuyer also didn’t mention laying off employees when it announced the new funding on Wednesday. However, he posted a notice on LinkedIn that at least four of his employees at Offerpad, including a product manager and his three software engineers, were laid off Wednesday and are looking for work.
Senior Software Engineer Christopher Straugn said in a public LinkedIn post:
A spokesperson for OfferPad confirmed that the company has laid off an unspecified number of employees, the details of which were announced during the company’s fourth-quarter earnings call on Feb. 22.
“Recent macroeconomic factors have slowed the growth trajectory of the real estate industry,” an OfferPad spokesperson told Inman in an email. “Like many other companies, we are scaling our business to the current market conditions. Unfortunately, some team members have been impacted. We support these individuals through this difficult transition. We provided a retirement package and extended medical coverage to help.”
OfferPad previously laid off about 7% of its workforce in September, and with the hiring pause in early 2022, the company’s headcount is down about 12% from peak hiring, said the CFO. Mike Burnett said in the company’s third quarter. earnings phone.
Rival iBuyer Opendoor laid off 18% of its workforce in November, or about 550 people. Last year, power company Knock cut almost half its workforce, or about 115 employees, following his $220 million financing from private investors.
Offerpad’s agreement to raise $90 million from existing investors, including CEO Brian Baer, Roberto Serra and First American Financial Corp., will see the company spend another six to one months at its current cash burn rate. Analysts at Keef, Brouillette & Woods (KBW) said the company could operate in 2020. ) wrote in a note to clients led by Ryan Tomasello.
“Based on our current model of an average quarterly cash burn rate of $30-40 million through the end of 2023, this means that Offerpad only has four to six quarters of cash runway left,” he said. KBW analyst said. “As a result, the $90 million private placement extends the company’s estimated cash runway by four quarters from his two.”
In its November earnings call, Bair outlined its strategy for negotiating the difficult “middle” phase of a market where buyers and sellers are at odds.
Sellers “are stuck with the idea that their home is worth the same as it was six months ago,” Baer said. is the toughest time for the entire real estate market, including iBuyers.”
Zillow, once one of the biggest players in iBuying, has completely exited the business. However, Offerpad plans to continue its efforts, envisioning iBuying as an attractive option for sellers dealing with the buyer’s market.
“iBuying becomes even more attractive when sellers can’t move from listing to pending in days and instead take weeks or months,” Bair said in November. “And if we are smart about how we underwrite homes in the market, there is a huge opportunity for growth.”
Meanwhile, Offerpad executives admit they will have to sell many of the homes they have already purchased. In the short term, Offerpad plans to turn to offering “asset-light” services that streamline transactions and drive direct sales to buyers, rather than flipping the house itself.
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