CoStar scores gain as activist investor abandons battle for Homes.com
The hedge fund Third Point was one of two major players highly critical of CoStar’s attempt to compete with three leading residential real estate portals
CoStar got some welcome news this weekend when one of two major activist investors dropped its bid to force the company to end its residential real estate business through the Homes.com platform, according to a report.
The hedge fund Third Point sold its entire stake in CoStar and said it would no longer make efforts to install a new board of directors. The fund has criticized the company’s heavy investments in competing with Zillow, Realtor.com and Redfin. Reuters reported this.
Reuters, citing unnamed sources, said it had read a letter from Third Point’s CEO explaining the move. The letter, Reuters reported, noted that Third Point still believed CoStar was undergoing a “reckless depletion” of its spending.
“We no longer believe that our original statement is still true today and have renounced our position in its entirety,” Loeb wrote in a letter to investors: Reuters reported this. “…Despite our best efforts, CEO Andy Florance has continued what can only be seen as a reckless outflow of the majority of the company’s operating revenues to Homes.com and its related acquisitions, even as the stock price has continued to plummet.”
Third point earlier called CoStar’s investment in Homes.com a “fiasco,” allowed by an “insomniac board” amid a “quixotic search” by CoStar CEO Andy Florance. A second hedge fund, DE Shawquickly joined Third Point in the proxy battle.
CoStar strongly opposed the effort, saying the heavy investment cycle in Homes.com had ended and following a playbook the company has used on its path to becoming a dominant player in commercial real estate.
“CoStar Group is focused on executing our proven playbook to build on our momentum as we enter our next chapter of margin expansion and profitable growth,” a company spokesperson said in a statement. “We look forward to continuing to work with shareholders as we continue to unlock the tremendous value of our digital ecosystem.”
Amid Homes.com’s defense, CoStar is guilty of defamation law firm representing the company. CoStar also suggested that DE Shaw had ulterior motives for joining the fight, noting that the hedge fund also invested in other real estate companies.
More recently, DE Shaw suggested as much CoStar had shifted its financial reporting in a way that made the performance of the Homes.com metric less transparent.
Against the backdrop of the struggle lies CoStar’s stock price, which has fallen 43 percent so far this year.
DE Shaw has not responded to multiple requests for comment since the proxy fight began, including on Monday.
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