Opendoor Overstated Price Algorithm Strength, Investors Say (1)

Opendoor Technologies Inc. portrayed its house pricing algorithm inaccurately in merger and public offering documents, inflating its stock price before the problem was brought to light, a pair of institutional investors say in a proposed class suit.

The algorithm couldn’t “accurately adjust to changing house prices across different market conditions and economic cycles,” increasing the risk for the company’s house-flipping business, the stockholders say. The investors—public employees’ benefit and retirement funds—filed their complaint Tuesday in the US District Court for the District of Arizona.

A September Bloomberg report brought to light data that showed Opendoor lost money on 42% of ...