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Zillow short seller cites antitrust suits, Homes.com competition

Lawsuits, platform wars could sink stock up to 60%: Spruce Point Capital

Zillow Short Seller Cites Antitrust Lawsuits, Resi Competition
Spruce Point Capital's Ben Axler, Zillow's Rich Barton (Getty, Zillow, Spruce Point Capital)

Short seller Spruce Point Capital is targeting the stock of one of the most well-known companies in residential real estate: Zillow.

The firm is shorting Zillow’s stock and suggested the company’s stock could fall between 40 and 60 percent in the long run, according to a company announcement reported by Bloomberg.

Spruce Point argued that Zillow’s model of selling marketing services to real estate agents could be “dramatically” threatened by the upheaval to the residential real estate industry being created by the antitrust commissions lawsuits.

Zillow chief executive officer Rich Barton has previously pointed to the company’s significant audience as a boost to avoid the worst case scenarios should commission rules change, even forecasting a “pay-to-play” model led by digital listing marketplaces, similar to some international markets if the lawsuits will eliminate buyer’s agents entirely. 

Still, Spruce Point argued that Zillow’s exposure to the antitrust lawsuits is an issue. It also noted increased competition from CoStar Group’s Homes.com — which is in the midst of a residential product marketing blitz — while dismissing Zillow’s “super app” as a bid to awe investors. 

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After opening at $56 on Tuesday, Zillow’s stock tumbled throughout the day before recovering late in trading, closing at $54.49, down 2.7 percent on the day. Zillow’s stock is up more than 27 percent over the last year, outperforming much of the housing market.

The company did not respond to Bloomberg’s request for comment.

Zillow lost $73 million in the fourth quarter, its fourth consecutive quarterly loss. The decline lined up with the net loss the firm reported in the same period in 2022. 

Short sellers can make their presence known to real estate investors. Last year, they piled on to Cushman & Wakefield’s stock, pushing the commercial brokerage’s short interest beyond 11 percent at one point. As of the end of January, Cusman was the most-shorted stock among big CRE brokerages.

— Holden Walter-Warner

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