Lawsuits filed by shareholders hit Zillow at the end of November. The lawsuits cite management’s decision to “wind down” ZillowOffers. The company’s market value was $48B in February; its market cap is now worth $13.8B.
Backdrop of ZillowOffers Demise
In September, Zillow’s Chief Operating Officer Jeremy Wacksman participated in a virtual conference sponsored by Piper Sandler, an investment banking company. Wacksman said during the conference, “The strength and the appeal for ZillowOffers just continues to grow. And we’re even more confident now that this is going to be a service really in all-weather markets.”
Six weeks later, BOOM. The company said ZillowOffers was “winding down” its operations. Why? Because, according to Zillow CEO Rich Barton, ZillowOffers’ price forecasting model was too volatile. And, by the way, ZillowOffers was responsible for the majority of the company’s revenue and operating expenses.
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Lawsuits from Investors Not Uncommon
Shareholder lawsuits are fairly routine when a company’s stock takes a dive, and Zillow’s stock most definitely jumped off the deep end. According to the end of Nasdaq trading at the end of November, Zillow’s market value was $13.8B…an enormous plunge from its market value of $48B in February.
These lawsuits cited wonderment that the statements of COO Wachsman made six weeks before the company pulled the plug on ZillowOffers were “…materially false and/or misleading statements” in violation of the federal Securities Exchange Act. The lawsuits went on to say that Zillow management “…created in the market an unrealistically positive assessment of the company and its financial well-being and prospects, thus causing the company’s securities to be overvalued.”
The first shareholder lawsuit was filed on November 16 in Seattle’s federal court on behalf of Dibakur Barua who purchased Zillow stock between February and November 2021. The second lawsuit was filed November 19 on behalf of Steve Silverberg, a Zillow investor. Both lawsuits also proposed a class action against the company to collect monetary damages on behalf of plaintiffs who invested in the company between February 10 and November 2, 2021.
Defendants named in both lawsuits include Zillow itself, Barton, Wachsman and Parker. Other lawyers around the country are soliciting other Zillow investors to file their own lawsuits against the company.
Zillow, naturally, acknowledged the lawsuits in a statement that also included, “As a general practice, we do not discuss pending litigation.”
Zillow Has Other Problems on Top of Lawsuits
Zillow is also dealing with a Canadian company, TRC Capital Investment Corporation, that announced a “mini-tender offer” to Zillow shareholders. (A tender offer solicits shareholders to sell their stock at a price set by a soliciting investor within a certain period of time. A mini-tender offer is when a soliciting investor, in this case TRC Capital, offers to buy less than 5% of the company’s shares.)
Zillow did publicly advise, some would say “warn,” its shareholders to reject TRC’s offer to purchase 2M of the company’s stock shares.
Thanks to RealTrends.
