Zillow seeks $1.1B cash infusion

The senior note offerings come as the company is growing its iBuying and mortgage businesses

Sep.September 05, 2019 12:47 PM
Zillow CEO Richard Barton (Credit: iStock)

Zillow CEO Richard Barton (Credit: iStock)

Zillow Group is seeking more than $1 billion in cash amid its “bold expansion.”

The company announced earlier this week two offerings of convertible senior notes — a $600 million offering due in 2024 with a fixed interest rate of 0.75 percent and a $500 million offering due in 2026 at a fixed rate of 1.375 percent, Inman reported. The sale is expected to close on September 9. When the notes mature, the company will repay investors in cash or shares of its Class C capital stock.

In a release, Zillow said it would be using the cash injection for “general corporate purposes,” which could include “working capital, sales and marketing activities, general and administrative matters and capital expenditures.”

On the company’s last earnings call, CEO Rich Barton compared Zillow’s bet on its instant homebuying service, Zillow Offers, and mortgage business to a “moon landing.” Both bets drove revenue in the second quarter and the CEO said it was evidence of the “early stages of a bold expansion” of Zillow. Based on second quarter results, Barton said Zillow Offers was on track to hit an annualized run rate of $1 billion in revenue.

The week before, portfolio manager Steve Eisman, who famously shorted the subprime market, said Zillow is one of his largest short positions. He told The Real Deal that he believed the company has run out of ideas. He described Zillow’s mortgage and iBuying businesses as proof that their “basic business” of making money off its traditional listings platform “was faltering or slowing.”

“In a recession, you’re going to get your head handed to you,” he said. [Inman] — Erin Hudson

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