Following on the heels of hedge fund investor Third Point’s recent demand that CoStar Group exit its Homes.com-led residential business entirely, a second hedge fund investor, the New York City-based D.E. Shaw Group, has voiced the same opinion.
Even with CoStar firing back at Third Point, saying its demands reflect “their complete misunderstanding of our business, industry, and the strong progress we are making,” a lengthy Feb. 4 open letter and presentation to the board of directors of CoStar, expressed D.E. Shaw’s position that “change is urgently needed at CoStar to arrest the Company’s prolonged stock price underperformance, increase profitability, and position the Company for durable value creation.
“CoStar’s purported ‘track record of stockholder value creation’ is, at best, an artifact of history, if not a convenient fiction. As a consequence, today every shareholder who has purchased CoStar’s stock in the last five years has lost money.
“Under the leadership of CEO Andy Florance, CoStar has continued to dedicate disproportionate attention and resources to its unprofitable Homes.com business. This continued investment, despite repeated failures to meet projections, has eroded the Company’s once-enviable margins and driven a significant decline in CoStar’s stock price, despite positive momentum in the core businesses.”
CoStar, with a market value of around $22 billion, has seen its stock price drop over 23% year to date as of Feb.3.
In an emailed statement to RISMedia, a CoStar Group spokesperson provided the following:
“D.E. Shaw has once again chosen to latch on to Third Point’s dangerously misguided effort to have CoStar Group abandon Homes.com despite its vital integral strategic importance to long-term shareholder value.
“Over the past month, management has met in person with more than 300 shareholders who expressed enthusiasm for our clear focus on accelerating our EBITDA growth and the exceptional potential within our new Homes.com AI platform. There is strong shareholder alignment with the Board’s unanimous support for a strategy that includes Homes.com for creating durable long-term shareholder value.”
