A Redfin investor wants the company to show its work.
An investor identified as Bruce Miller filed a lawsuit against the firm and its board of directors, including CEO Glenn Kelman, alleging that they misled investors prior to a June 4 shareholder vote on a proposed $1.75 billion sale to Rocket Companies.
The complaint alleges that Redfin omitted important details about the financial forecasts of both companies and the merged business, as well as the data underpinning the opinion of Goldman Sachs, which served as a financial advisor on the deal. Miller also claims that Goldman Sachs failed to fully disclose its conflict of interest in advising Redfin’s board on the deal.
The lawsuit was filed the same day Redfin reported falling revenue and increased losses in its first quarter earnings. The company reported a net loss of $93 million, up from a loss of $67 million in the same quarter last year. The company’s web traffic fell to 46 million monthly average visitors, down from 49 million the same time last year.
The company did not hold an earnings call due to the pending transaction. “We can’t wait to join Rocket and build the future of homeownership,” Kelman said in a statement.
A spokesperson for Redfin did not respond to a request for comment.
Miller’s lawsuit calls into question the future of that partnership, as it seeks to prevent the merger from going through until the allegedly omitted information has been communicated “truthfully and completely.” If the deal is consummated, Miller is asking for it to be rescinded or to be awarded damages.
In the complaint, Miller alleges that the May 5 proxy statement sent to shareholders does not contain an updated 2025 financial plan discussed by the board in a December meeting, the impact of potential synergies from the merger and any financial projections for Rocket reviewed by the board.
The lawsuit also claims that Goldman Sachs failed to disclose assumptions underlying its valuation analyses and details around how much the bank stands to gain as a counterparty on capped call transactions that result from the deal.
“When an advisor stands to earn fees through a separate financial deal if a proposed transaction is completed, this incentivizes the advisor to push a transaction through regardless of its merits,” the complaint states. “Thus, Goldman Sachs was incentivized to push for and recommend the Proposed Transaction in order to receive its advisory fee and the potential undisclosed ‘gain’ from the Capped Call Transactions.”
The lawsuit came on the same day that law firm Halper Sadeh announced an investigation into whether the exchange rate of Redfin for Rocket shares represents fair value to shareholders.
Depending on the outcome of the transaction, the law firm said it may seek an increased consideration for shareholders, additional disclosures on the proposed deal or other benefits.
Lawyers from the firm did not respond to a request for comment.