Investors alleged company misled them on home pricing algorithm's capabilities
Opendoor Technologies Inc. has agreed to pay $39 million to settle a securities class action lawsuit that accused the online real estate platform of misleading investors about the performance and capabilities of its proprietary home pricing technology.
The proposed settlement was filed last Friday in federal court in Arizona and is subject to approval by US District Judge Michael Liburdi.
The lawsuit, originally filed in 2022, alleged that Opendoor misrepresented the sophistication and effectiveness of its AI-powered pricing algorithms, which it claimed could buy and sell homes more profitably and efficiently than traditional real estate firms.
According to the plaintiffs, Opendoor marketed itself as a tech-driven disruptor in residential real estate but was actually using a human-influenced pricing process that made it “just as susceptible to changing economic conditions as any other traditional real estate company.”
The lawsuit claimed Opendoor “misleadingly portrayed the company as a tech disruptor that used AI-powered algorithms to buy and sell homes more profitably and efficiently than other traditional real estate companies.”
The plaintiffs also alleged that the company failed to disclose key weaknesses in its pricing model during volatile market shifts, contributing to a steep 94% decline in Opendoor’s stock price from its December 2020 IPO to November 2022.
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In court filings, Opendoor denied any wrongdoing but agreed to settle the case to avoid the “expense, risk, and uncertainty of further litigation.” The company is represented by Lyle Roberts of A&O Shearman.
As part of the proposed resolution, lawyers for the plaintiffs, Michael Canty and James Christie of Labaton Keller Sucharow, said they would seek up to 30% of the settlement ($11.7 million) in legal fees. The plaintiffs described the $39 million deal as a “prompt and substantial tangible recovery” for investors.
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