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Zillow Under Investigation for Securities Fraud

Law firms across the country have launched full investigations into Zillow for possible securities fraud in the latest fallout from their November 2nd announcement to discontinue their iBuyer program, Zillow Offers.

Stock Prices in Freefall

Zillow stock prices have plummetted nearly 40% since the initial announcement on October 29th to slow down the Zillow Offers program. These law firms are investigating whether Zillow misled shareholders about the viability of the Zillow Offers program and the accuracy of the Zestimate pricing model.

"We're focused on investors' losses, whether Zillow misled investors about its visibility into the housing market and the efficacy of its pricing models, and whether Zillow may have historically overstated its inventory account," said Reed Kathrein, the Hagens Berman partner leading the investigation.

As recently as August 5, 2021, on their Quarter 2 Earnings call, senior management at Zillow boasted about the growth of the company's Zillow Offers business and its "strong durable support for the housing market." On this call, Zillow officials also discussed improvements to the Artificial Intelligence behind the Zestimate pricing model.

Unrealized Aspirations

In 2019, the Zillow Homes segment was projected to one day add $20 Billion to Zillow's gross annual revenue, but to say that it fell short would be an understatement. The question that these investigations seek to answer is when did Zillow executives begin to realize that things were going in the other direction with the Zillow Offers program and if that information was intentionally withheld from shareholders for an extended period of time.

If evidence of fraud is found, the next step would be to launch a class-action lawsuit against Zillow on behalf of the injured shareholders. Do you think that Zillow acted in good faith? Let us know in the comments below or chat about it with your colleagues in our next CE class!

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