Third Point’s Daniel Loeb Seeks to Overhaul CoStar Board

Less than a year after securing board changes at CoStar Group, hedge fund Third Point is back with another ultimatum: replace most of the board, rein in executive pay and find an exit from Homes.com.

Third Point plans to nominate several directors to CoStar’s eight-person board as part of an effort to reverse the company’s push into the residential real estate space through its investment in Homes.com, according to a letter to the board from Third Point CEO Daniel Loeb made public on Tuesday.

In addition to replacing the majority of the current board, Loeb called for executive compensation to be tied more closely to performance and for CoStar to find an exit strategy for Homes.com and its other residential enterprises.

CoStar, which is considered the market leader in commercial real estate data, began its push into residential real estate around five years ago, when it purchased Homes.com. Loeb estimated that CoStar has spent roughly $5 billion investing in its residential real estate, with an expected revenue of $80 million for 2025.

The letter comes less than a year after Third Point and hedge fund D.E. Shaw initially raised concerns over the direction of the company, leading to the appointment of three new members to the board, an independent board chair and the establishment of a capital allocation committee to review CoStar’s investment in Homes.com and its timeline for profitability.

Earlier this month, CoStar announced that it would significantly scale back its investment in Homes.com in an effort to reach profitability by 2030.

Those efforts have not been enough for Loeb, who excoriated the company’s strategic direction and singled out CoStar CEO Andy Florance for compensation he says is out of step with his performance.

“The Company’s anemic performance can be ascribed entirely to the misallocation of billions of dollars into Homes.com, overseen by a feckless board of directors that has failed to protect shareholders from Mr. Florance’s quixotic quest while rewarding him with exorbitant pay packages,” Loeb wrote.

Loeb pointed to CoStar’s stock price, which has fallen 27 percent over the past five years while the S&P 500 has nearly doubled in that time, as evidence of the company’s failure. CoStar’s stock price jumped over 5 percent to $69.53 at the market open on Tuesday.

Loeb also criticized Florance’s compensation, which he said was $37 million in 2024. That puts Florance in the top decile of of S&P 500 CEOs based on compensation, according to the letter.

Loeb also criticized the company’s repeatedly revised projections, pointing to guidance provided four years ago towards $700 million in revenue by 2027, which was later abandoned. He wrote that he believes the company’s core commercial business is made up of “a collection of exceedingly strong franchises” that he sees achieving long-term profitability.