In another tense back and forth between CoStar Group and an activist investor, hedge fund The D.E. Shaw Group criticized what it called the company’s latest “attempt to evade accountability for longstanding and ongoing underperformance of Homes.com.”
The new dispute comes about a month after D.E. Stevens first demanded that CoStar abandon its residential business.
“Last month, CoStar announced a sudden change in reporting structure that provides investors with less visibility into its underlying operating business and, in our view, represents a troubling step backward for transparency and accountability,” the D.E. Shaw letter began. “The segment reorganization appears designed to obscure the results of CoStar’s persistently underperforming Homes.com business—just six weeks after management made new performance commitments to shareholders for that same business.”
The open letter, officially from Managing Directors Edwin Jager and Michael O’Mary, claimed that the new reporting approach effectively buries Homes.com’s financial results within a new, amalgamated ‘Residential’ segment that incorporates the larger and more profitable Apartments.com business, “which we believe is performing well and has strong potential to deliver accelerating growth, and three other businesses.”
Responding to the accusations, CoStar, in an emailed statement to RISMedia, said that “contrary to D.E. Shaw’s misleading claims, CoStar Group has never reported Homes.com results as a separate segment. CoStar Group changed our reporting segments from geography-based to product portfolio-based to align with how we run our business.
“Our new segment disclosure actually offers more transparency by providing audited revenue, EBITDA, adjusted EBITDA and margin disclosures for both the residential and commercial segments in our recent 10-K, as well as continuing to provide disaggregated revenue disclosures. Investors should expect similar Homes.com disclosures on our earnings calls that CoStar Group has always provided to stockholders.”
CoStar continued by claiming that D.E. Shaw actually holds a larger stake in CoStar competitors, urging its stockholders to “ask if D.E. Shaw’s real agenda is to unlock value through its investment in CoStar Group or in our competitors at the expense of CoStar Group stockholders.”
Additionally, CoStar shared that it has retained a law firm specializing in “representing clients in complex defamation matters and high-profile reputational attacks, to bolster its team of advisors.”
