Negative Report Sends Zillow Shares Falling

September 26, 2012

Real estate Web site Zillow saw its stock shares drop on Tuesday after a critical report was released questioning the company’s financial prospects. 

Citron Research, a short seller’s research firm, released a report Tuesday saying that Zillow's "underlying fundamentals look worse than they did even seven years ago.” The report says that Zillow "operates in a hotly competitive space without a sustainable advantage" and has a "business model that never worked." 

The report also says that there have been recent stock sales by company insiders, which Citron alleges is due to the "limitation of the current business model and the uncertainty of the future."

Zillow started trading publicly in July 2011. It obtains revenue from advertising and subscriptions from real estate agents.  

The stock has been called one of the best-performing Internet IPOs recently. Zillow’s shares have more than doubled since their debut, going from $20 with its initial offering price to $44.41 on Monday. During trading on Tuesday, after news broke of the report, shares of Zillow dropped as low as $40.56.

"Investors really need to examine why they are paying such a nosebleed-high valuation for decelerating growth, especially in the face of the huge insider sales," the Citron report says.

Zillow has declined so far to comment publicly on the Citron report. 

Source: “Zillow Shares Fall on Negative Research Report,” Associated Press (Sept. 25, 2012)

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