The Real Deal New York

All in: Zillow bigwigs buy $44M worth of stock amid selloff

Richard Barton and Jay Hoag upped their stakes after Nov. 7 stock tumble
By E.B. Solomont | November 28, 2018 08:00AM

Richard Barton, Jay Hoag, and Spencer Rascoff

Zillow Group’s stock has taken a beating on Wall Street, but two major shareholders just doubled down on their investments in the listings giant.

Richard Barton, the Seattle-based company co-founder and executive chairman, bought $19.2 million worth of Zillow stock last week, regulatory filings show. Meanwhile, Jay Hoag, a venture capitalist who sits on Zillow’s board of directors, shelled out $25 million to up his stake in the company.

Both scooped up discounted shares of Zillow after the stock price tumbled 20 percent in the wake of an earnings report on Nov. 6 that shook investor confidence. In its earnings report, Zillow acknowledged that revenue from its cash cow, Premier Agent, was lower than expected. The company laid out steps it was taking to address the issue, but that didn’t calm investor nerves.

In a statement following his stock purchase, Barton said he is committed to Zillow’s long term-vision, which includes buying and selling homes direct from consumers. He said Zillow’s work in bringing real estate data to light, “has set the stage for Act II: transforming the way consumers buy, sell, mortgage, and rent homes.”

Barton’s confidence, however, isn’t shared widely on Wall Street.

Following this month’s earnings report, Zillow’s stock price sank overnight to $29.99 per share from $40.74 per share. And on Nov. 7, investors traded 21.4 million shares of the company stock, compared to around 2.4 million on an average day. The price has been notching small improvements since, and closed at $33.47 per share on Tuesday.

Zillow faced blowback during the third quarter from changes it made to Premier Agent — including the addition of vetted buyer leads — which resulted in the loss of some agent advertisers. During the Nov. 6 earnings call, CEO Spencer Rascoff said that “Premier Agent issues are very solvable.” He said some changes have already been made; for example, Zillow is toning down its vetting of buyers so that agents receive more leads.

However, analyst Tom White of D.A. Davidson, said improved revenue from Premier Agent wasn’t likely until well into 2019 “at best.”

“For shorter-term investors, [Zillow] seems to have a lot on its plate,” he wrote in a Nov. 7 note.

But neither Barton nor Hoag are short-term investors.

Barton, a former Microsoft executive who also helped start Expedia and Glassdoor, was already one of Zillow’s largest shareholders. He owned 31.6 percent of the company’s total shares in April, when Zillow filed its most recent proxy statement.

To increase his stake, he paid between $26.95 and $28.14 per share between Nov. 16 and Nov. 20, filings show.

Hoag co-founded Menlo Park-based Technology Crossover Ventures, a growth equity fund that’s raised $12 billion since 1995. The firm was an early investor in Zillow, which went public in 2011. TCV has also backed the likes of Facebook, Expedia, Airbnb and Netflix.

Hoag purchased 850,000 shares of Zillow on Nov. 21, according to filings, including 600,000 shares priced at $29.08 and 250,000 shares priced at $29.47. He now owns 2.79 million shares of Zillow stock. Hoag joined Zillow’s board in 2005 and he also sits on the board of TripAdvisor, which was spun off from Expedia in 2011. Through a spokesperson, he declined to comment.