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SHARE-BASED AWARDS | 12 Months Ended
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Dec. 31, 2022
Share-Based Payment Arrangement [Abstract] |
SHARE-BASED AWARDS | SHARE-BASED AWARDS 2014 Stock Plan Our 2014 Stock Plan (the “2014 Plan”), as last amended and approved by the board of directors on February 6, 2020, allowed the Company to grant up to 106,320,623 shares of common stock to employees, directors, and non-employees pursuant to awards of stock options, restricted stock or restricted stock units (“RSUs”) granted under the 2014 Plan. Upon the Closing, the remaining unallocated share reserve under the 2014 Plan was cancelled and no new awards will be granted under the 2014 Plan. Awards outstanding under the 2014 Plan were assumed by Opendoor Technologies upon the Closing and continue to be governed by the terms of the 2014 Plan. 2020 Equity Incentive Plans In connection with the close of the Business Combination, the Company adopted the 2020 Incentive Award Plan (the “2020 Plan”) under which 43,508,048 shares of common stock were initially reserved for issuance. The 2020 Plan allows for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents and other stock or cash based awards. The number of shares of the Company’s common stock available for issuance under the 2020 Plan automatically increases on the first day of each calendar year, beginning January 1, 2022 and ending on and including January 1, 2030, by the lesser of (a) a number equal to the excess (if any) of (1) 5% of the aggregate number of shares of common Stock outstanding on the final day of the immediately preceding calendar year over (2) the number of shares of common Stock then reserved for issuance under the 2020 Plan as of such date, and (b) such smaller number of shares determined by the Company’s board of directors. In connection with the close of the Business Combination, the Company’s board of directors approved the 2020 Employee Stock Purchase Plan (“ESPP”), which was last amended on December 6, 2021. There are 5,438,506 shares of common stock initially reserved for issuance under the ESPP. The number of shares of the Company’s common stock available for issuance under the ESPP automatically increases on the first day of each calendar year, beginning January 1, 2022 and ending on and including January 1, 2030, by the lesser of (a) 1% of the total number of shares of common stock outstanding on December 31 of the immediately preceding calendar year and (b) such number of shares as is determined by the Company’s board of directors; provided that, no more than 54,385,060 shares may be issued under the ESPP. As of December 31, 2022, 493,790 shares have been issued under the ESPP. 2022 Inducement Plan In July 2022, the Company’s board of directors adopted the 2022 Inducement Plan (the “Inducement Plan”). Under the Inducement Plan, 31,200,000 shares were initially reserved for issuance. The purpose of the Inducement Plan is to attract, retain and motivate prospective employees of the Company, particularly executive team members and employees joining as part of business combinations. The Inducement Plan allows for the issuance of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents and other stock or cash based awards to new employees of the Company or any subsidiary of the Company. Stock options and RSUs Option awards are generally granted with an exercise price equal to the fair value of the Company’s common stock at the date of grant. Options are exercisable over a maximum term of 10 years from the date of grant and generally vest over a period of four years. Incentive stock options granted to a 10% shareholder are exercisable over a maximum term of five years from the date of grant. A summary of the stock option activity for the year ended December 31, 2022, is as follows:
| Number of Options (in thousands) |  | Weighted- Average Exercise Price |  | Weighted- Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value (in millions)
Balance – December 31, 2021 | 14,546 |  |  | $ | 2.12 |  |  | 4.7 |  | $ | 182 |
Granted | — |  |  | — |  |  |  |  |
Exercised | (2,959) |  |  | 1.35 |  |  |  |  |
Forfeited | (447) |  |  | 6.60 |  |  |  |  |
Expired | (428) |  |  | 2.42 |  |  |  |  |
Balance – December 31, 2022 | 10,712 |  |  | 2.13 |  |  | 3.5 |  | $ | 1 |
Exercisable – December 31, 2022 | 10,668 |  |  | 2.12 |  |  | 3.5 |  | $ | 1 |
Aggregate intrinsic value represents the difference between the exercise price of the options and the estimated fair value of the Company’s common stock. The total intrinsic value of options exercised for the years ended December 31, 2022, 2021, and 2020, was $20 million, $144 million, and $46 million, respectively. The weighted-average grant date fair value per option granted for the year ended December 31, 2021 was $10.18 . There were no options granted during the years ended December 31, 2022 and 2020. RSUs typically vest upon a service-based requirement, generally over a two or four year period. Prior to 2021, certain awards also had a performance condition to vesting, which was satisfied upon completion of the February 2021 Offering and triggered the recognition of compensation expense for certain RSUs for which the time-based vesting condition had been satisfied or partially satisfied. Subsequent to the February 2021 Offering, these RSUs are only subject to time-based vesting conditions. A summary of the RSU activity for the year ended December 31, 2022, is as follows:
| Number of RSUs (in thousands) |  | Weighted- Average Grant-Date Fair Value
Unvested and outstanding – December 31, 2021 | 53,446 |  |  | $ | 17.35 |
Granted | 45,373 |  |  | 4.85 |
Vested | (17,280) |  |  | 12.15 |
Forfeited | (26,992) |  |  | 17.62 |
Unvested and outstanding – December 31, 2022 | 54,547 |  |  | $ | 10.29 |
The total fair value of RSUs vested for the years ended December 31, 2022 and 2021 was $98 million and $599 million, respectively. No RSUs vested during the year ended December 31, 2020. Restricted Shares The Company has granted Restricted Shares to certain continuing employees, primarily in connection with acquisitions. The Restricted Shares vest upon satisfaction of a service condition, which generally ranges from three to four years. A summary of the Restricted Shares activity for the year ended December 31, 2022 is as follows:
| Number of Restricted Shares (in thousands) |  | Average Grant-Date Fair Value
Unvested – December 31, 2021 | 692 |  |  | $ | 3.91 |
Vested | (623) |  |  | 4.01 |
Forfeited | (69) |  |  | 3.02 |
Unvested – December 31, 2022 | — |  |  | $ | — |
The total fair value of Restricted Shares vested for the years ended December 31, 2022, 2021, and 2020 was $1 million, $21 million, and $9 million, respectively. ESPP The first offering period for the Company's 2020 ESPP began on March 1, 2022. The ESPP, pursuant to Internal Revenue Code Section 423, allows eligible participants to purchase shares using payroll deductions of up to 15% of their total compensation, subject to a $25,000 calendar year limitation on contributions. The Company has limited the maximum number of shares to be purchased in an offering period to 1,000 shares per employee. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a 15% discount on the lower price of either (i) the offer period start date or (ii) the purchase date. Each offering period is six months in duration. ESPP employee payroll contributions withheld as of December 31, 2022 were $2 million and are included within Accounts payable and other accrued liabilities in the consolidated balance sheets. Payroll contributions withheld as of December 31, 2022 will be used to purchase shares at the end of the current ESPP purchase period ending on February 28, 2023. The fair value of ESPP purchase rights is estimated at the date of grant using the Black-Scholes option-pricing valuation model. The following assumptions were applied in the model to estimate the grant-date fair value of the ESPP.
| Offering Period
| September 1, 2022 - February 28, 2023 |  | March 1, 2022 - August 31, 2022
Fair value | $ | 1.78 |  |  | $ | 3.55 |
Volatility | 94.5 | % |  | 101.4 | %
Risk-free rate | 3.34 | % |  | 0.60 | %
Expected life (in years) | 0.5 |  | 0.5
Expected dividend | $ | — |  |  | $ | — |
The Company recognized stock-based compensation expense related to the ESPP of $2 million during the year ended December 31, 2022. As of December 31, 2022, total estimated unrecognized compensation expense related to the ESPP was $0.3 million. The unamortized compensation costs are expected to be recognized over the remaining term of the offering period of 2 months. Stock-based compensation expense Stock-based compensation expense is allocated based on the cost center to which the award holder belongs. The following table summarizes total stock-based compensation expense by function as presented in the consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020, as follows (in millions):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
General and administrative | $ | 109 |  |  | $ | 463 |  |  | $ | 33 |
Sales, marketing and operations | 18 |  |  | 13 |  |  | 1 |
Technology and development | 44 |  |  | 60 |  |  | 4 |
Total stock-based compensation expense | $ | 171 |  |  | $ | 536 |  |  | $ | 38 |
The Company recognized $(13) million, $290 million, $20 million of compensation expense during the years ended December 31, 2022, 2021, and 2020 respectively, related to all market condition awards outstanding. In December 2022, Eric Wu resigned as CEO of Opendoor, resulting in a $57 million reversal of stock-based compensation expense related to his market condition awards. In June 2021, the market condition for two market condition awards was satisfied, which resulted in the accelerated recognition of $2 million of stock-based compensation expense in the year ended December 31, 2021. During the year ended December 31, 2022, no market conditions were satisfied. As of December 31, 2022, there was $383 million of unamortized stock-based compensation costs related to unvested RSUs, stock options, and Restricted Shares. The unamortized compensation costs are expected to be recognized over a weighted-average period of approximately 2.3 years. Valuation of options The Black-Scholes Model used to value stock options incorporates the following assumptions:
|  |  |  |  | Year Ended December 31,
|  |  |  |  | 2021
Fair value |  |  |  |  | $ | 15.00 |
Volatility |  |  |  |  | 73 | %
Risk-free rate |  |  |  |  | 1.09 | %
Expected life (in years) |  |  |  |  | 7
Expected dividend |  |  |  |  | $ | — |
Fair Value of Common Stock Prior to the Company’s common stock becoming publicly traded, the fair value of the common stock underlying the stock option awards was determined by the board of directors. Given the absence of a public trading market, the board of directors considered numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting at which awards were approved. These factors included, but were not limited to (i) contemporaneous third-party valuations of common stock; (ii) the rights, preferences and privileges of convertible preferred stock relative to common stock; (iii) the lack of marketability of common stock; (iv) stage and development of the Company’s business; (v) general economic conditions and (vi) the likelihood of achieving a liquidity event, such as an initial public offering or sale, given prevailing market conditions. Volatility Prior to the Company’s common stock becoming publicly traded, the expected stock price volatilities were estimated based on the historical and implied volatilities of comparable publicly traded companies as the Company did not have sufficient history of trading its common stock. Subsequent to the Company’s stock becoming publicly trade, the expected stock price volatilities were determined based on the volatilities implied by the price of the Company’s publicly traded call options in its common stock. Risk-Free Interest Rate The risk-free interest rates are based on U.S. Treasury yields in effect at the grant date for notes with comparable terms as the awards. Expected Life The expected term of options granted to employees is determined using the simplified method, which allows the Company to estimate the expected life as the midpoint between the vesting period and the contractual term, as the Company's historical share option exercise experience does not provide a reasonable basis upon which to estimate the expected term. Dividend Yield The expected dividend yield assumption is based on the Company’s current expectations about its anticipated dividend policy. Valuation of RSUs and Restricted Stock Prior to the Business Combination, given the absence of a public trading market, the Company’s board of directors considered numerous objective and subjective factors to determine the fair value of common stock at each meeting at which awards were approved. These factors include, but were not limited to, (i) contemporaneous valuations of common stock performed by an independent valuation specialist; (ii) developments in the Company’s business and stage of development; the Company’s operational and financial performance and condition; (iii) issuances of preferred stock and the rights and preferences of preferred stock relative to common stock; (iv) current condition of capital markets and the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company; and (v) the lack of marketability of the Company’s common stock. For financial reporting purposes, the Company considers the amount of time between the valuation date and the grant date to determine whether to use the latest common stock valuation or a straight-line interpolation between the two valuation dates. The determination includes an evaluation of whether the subsequent valuation indicates that any significant change in valuation had occurred between the previous valuation and the grant date.

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