Why Opendoor Stock Plummeted by Almost 8% on Monday

Key Points

• The company delayed a shareholder vote about its equity until August.

• It is considering a reverse stock split -- often not a good sign.

• 10 stocks we like better than Opendoor Technologies ›

Investors eagerly shut the door on real estate transaction platform developer Opendoor Technologies (NASDAQ: OPEN) on Monday. They didn't take kindly to news of an important vote on the company's future, and sent the share price down by almost 8% on the day. Meanwhile, the S&P 500 (SNPINDEX: ^GSPC) flatlined across the session, indicating that many other stocks would have been better pickups.

Decision delayed

Well before market open, Opendoor announced it was to adjourn the special stockholder meeting scheduled for that day. That convocation was intended for a vote on two proposals to effect a reverse stock split of the company's equity. The meeting was rescheduled for this coming Aug. 27.

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Opendoor investors are being polled on a pair of separate reverse-stock split plans. In its press release on the adjournment, the company stressed that approval of either won't necessarily mean ratification.

In its words, "an approval would provide the company's board of directors with an option to pursue a reverse stock split only if the Board believes it is in the best interests of Opendoor and its stockholders, which includes seeking to ensure that Opendoor remains listed on Nasdaq."

Nasdaq requires the closing prices of the stocks listed on its exchange to not fall below $1 per share for 30 consecutive days. Opendoor can fall back in compliance if its shares trade above that level for 10 trading days, at minimum, by Nov. 24 of this year.

Doing the minimum

Reverse stock splits are a common tool used by companies that find their shares underwater, i.e., below those minimum price stipulations. Although they aren't always a sign of a business in trouble, they are certainly not encouraging for shareholders or other folks who might otherwise be interested in the stock. Personally, I'd avoid Opendoor until it can right the ship with its equity.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.