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Report: Antitrust Concerns Trigger Short Selling of Zillow Stock

By  |  March 6, 2024
Zillow, iBuying, pause, real estate

In the volatile landscape of residential real estate, one of the industry’s giants, Zillow, finds itself in the crosshairs of short seller Spruce Point Capital. The investment firm has taken a bearish stance on Zillow’s stock, predicting a potential plummet of 40 to 60 percent in the long term, as reported by Bloomberg.

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    Spruce Point Capital’s skepticism revolves around Zillow’s reliance on selling marketing services to real estate agents. The firm suggests that this business model could face significant threats amid the tumultuous changes rocking the residential real estate industry due to ongoing antitrust lawsuits.

    According to Spruce Point, the wave of legal action from antitrust commissions poses a “dramatic” risk to Zillow’s operations. The company’s chief executive officer, Rich Barton, has attempted to assuage concerns by highlighting Zillow’s substantial audience, presenting it as a buffer against worst-case scenarios resulting from changes in commission rules. Barton even floated the possibility of a “pay-to-play” model akin to digital listing marketplaces in international markets if lawsuits eliminate buyer’s agents entirely. However, Spruce Point remains steadfast in its assertion that Zillow’s exposure to antitrust litigation remains a pressing issue.

    Read more: Zillow Faces Private Antitrust Suit

    Moreover, Spruce Point points to increased competition from CoStar Group’s Homes.com, which is aggressively marketing its residential products. It dismisses Zillow’s recent efforts to establish itself as a “super app” as a mere ploy to impress investors.

    Zillow’s stock mirrored the uncertainty surrounding the company, experiencing a tumultuous trading day. Opening at $56 on Tuesday, the stock took a significant dip throughout the day before staging a late recovery, ultimately closing at $54.49, marking a 2.7 percent decline for the day. Despite this, Zillow’s stock has shown resilience over the past year, surging by more than 27 percent, outperforming many benchmarks in the housing market.

    As Zillow navigates through these challenging waters, investors and industry observers keenly await how the company will address the mounting antitrust pressures and fierce competition, and whether its current strategies will suffice in safeguarding its market position.

    Source: Bloomberg