In the wake of its decision to shut down its iBuying business, Zillow has been slapped with multiple lawsuits alleging that it illegally misled investors as to the health of that business.
“The strength and the appeal of Zillow Offers just continues to grow,” said Zillow Chief Operating Officer Jeremy Wacksman at a September conference held by the investment banker Piper Sandler. “We’re even more confident this is going to be a service really in all-weather markets.”
Such optimism quickly crumbled, and Zillow announced just six weeks later that it was winding down the Zillow Offers business that pulled in the bulk of the company’s revenue and accounted for the majority of its operating expenses. Zillow CEO Rich Barton said the company was closing the iBuying business as its price forecasting model was just too volatile.
Now, a pair of lawsuits filed on behalf of Zillow investors cite the above statement by Wacksman – an other rosy claims about the business made throughout 2021 – as evidence that the company illegally misled investors.
They have every reason to complain. In February of this year Zillow had a market value of $48 billion. But at the close of trading Wednesday its market cap had plunged to just $13.49 billion, meaning the company’s stock has lost more than two-thirds of its value.
Central to the case will be whether the statements by Zillow executives were not merely just self-promotion, but “materially false and/or misleading statements” in violation of the U.S. Securities Exchange Act.
The first of the shareholder lawsuits against Zillow was filed in Seattle on Nov. 16 on behalf of Dibakur Barua. The proposed class action describes Barua as someone who “purchased or otherwise acquired Zillow securities between February 10, 2021 and November 2, 2021.”
The suit names Zillow as a co-defendent along with Barton, Wacksman and the company’s chief financial officer Allen Parker. It alleges that statements such as Wacksman’s, and also from Barton that repeatedly called Zillow Offers a “durable service”, helped to create in the market a “unrealistically positive assessment of the company and its financial well-being and prospects, thus causing the company’s securities to be overvalued.”
The lawsuit has been assigned to Judge Thomas Zilly, who is also providing over a lawsuit brought by the real estate brokerage Rex against Zillow and the National Association of Realtors.
Meanwhile a second lawsuit was filed against Zillow on Nov. 19 in the Seattle federal court on behalf of investor Steve Silverberg. That suit also proposes a class action to collect monetary damages on behalf of plaintiffs who acquired Zillow stock between Feb. 10 and Nov. 2.
Some law firms are seeing an opportunity too. The New York-based law firm Brager, Eagel & Squire issued a press release Monday that “encourages Zillow investors to contact the firm”, presumably so it can launch its own lawsuit.
Zillow said in a statement to media that it is aware of the lawsuits and is currently reviewing them. “As a general practice, we do not discuss pending litigation,” it said.