“Real Estate Tech” in Existential Crisis as Housing Sours, Stocks Plunge, New Money Out of Reach: Redfin & Compass Try to Survive by Cutting Staff. Opendoor, Zillow Sag

Abstract

Their business model relied on burning cash, and the whole thing was designed from get-go to use home-made growth metrics to bamboozle investors into buying the stock and pump up the shares. Based on their high share price, could issue more shares and raise more money, and feed their cash-burn machine. With their shares down 80% or 90%, they cannot fake it any longer, and they cannot sell more shares because no one wants them, and they're going to run out of cash and won't be able to cover their expenses, and then they cease to exist, and their shares will go to zero, unless they can get the cash-outflows under control, which means cost-cutting. On the news, shares of Redfin [RDFN] fell to a new closing low of $8.13. During the pandemic, the stock encountered the miracles of the stock jockeys that plowed their stimmies into whatever, the meme-stock chasers, and the hedge funds that followed them, and they all had a hoot and catapulted the shares to $98.44 in February 2021, yes, that infamous February 2021, after which the bamboozle ran out, and everyone began ever so slowly to sober up, and everything came unglued. Redin's shares have collapsed 92%: Compass announced today - after they too apparently had a come-to-Jesus meeting at the top - the "Elimination" of 10% of its staff, about 450 folks. Upon the news that Compass is now trying to figure out how to cost-cut its way to a positive cash flow as revenues are going to take a hit, and as its fake growth model fell apart, the shares kathoomphed 10.5%, to $4.26 a share, down 81% from the high, which occurred on the day of the IPO. Just about every investor that got bamboozled into touching this got shookalacked: Zillow didn't make any additional layoff announcements today, but given the conditions that the housing market is now facing, and the plight of Redfin and Compass, its shares dropped 6.2% today, to $30.22, down 86% from its meme-stock-stimmie-miracle high of February 2021, and back where it had first been in 2013.