||In re Barua v. Zillow Group, Inc., et al.
||United States District Court for the Western District of Washington
||Honorable Thomas S. Zilly
||Zillow Group, Inc., Richard N. Barton, Allen W. Parker, and Jeremy Wacksman
||August 5, 2021, through November 2, 2021, inclusive
This securities fraud action alleges that Defendants violated Section 10(b) of the Securities Exchange Act by affirmatively misleading investors about the reckless and undisclosed bet that Zillow Group, Inc. (“Zillow” or the “Company”) was taking with its Zillow Offers iBuyer business.
iBuyers use algorithms to estimate home values, and then make instant cash offers to purchase homes based on those estimated values. If a homeowner accepts, the iBuyer makes repairs and flips the home. Zillow entered the iBuyer business in 2018, launching Zillow Offers. By 2021, however, Zillow Offers’ growth was lagging. In an attempt to jumpstart it, Plaintiff alleges that in Spring 2021, Defendants undertook a series of drastic and risky actions, including applying large “overlays” on top of the values generated by Zillow’s pricing algorithms, which significantly increased purchase offers. Not surprisingly, many homeowners accepted Zillow’s inflated offers and soon the Company was touting the “strong demand” for Zillow Offers to investors while concealing the risky overlays that had actually driven growth.
Within months, Defendants’ reckless bets caught up to them. By November 2, 2021, Zillow announced that it was shuttering Zillow Offers, taking a $569 million impairment charge because it had overpaid for 18,000 homes, and axing 25% of its workforce. In response, Zillow’s stock prices plummeted, causing significant investor losses. Market commentators expressed outrage, calling the announcement a “financial disaster,” a “debacle” and declaring that “management should be accountable.”
On May 12, 2022, Plaintiff filed the operative complaint (“Complaint”) in the action on behalf of a class of investors who purchased Zillow’s stocks, including its Class C capital stock and Class A common stock, from August 5, 2021 to November 2, 2021, inclusive. Defendants moved to dismiss the Complaint in its entirety on July 11, 2022. On December 7, 2022, U.S. District Judge Thomas S. Zilly of the Western District of Washington denied Defendants’ motion as to all but one statement. The case is now proceeding in discovery.
Read Consolidated Class Action Complaint Here