The speculation went rampant on July 24 after reports surfaced that Zillow could buy its rival Trulia for $2 billion. The source had not been disclosed and its veracity was uncomfirmed, but the market seemed to believe it. After the rumor came out around 2:00 pm EDT, Zillow surged 22.1%, Trulia gained 39.1% in an hour, and remained high after trading.
Zillow and Trulia are both online real estate data specialists that help homebuyers and renters find housing information.
After the market closed on Thursday, Seattle-based Zillow was at price of $126.47 a share with roughly $5.76 billion market cap, and San Francisco based Trulia was $53.85 a share at $1.98 billion market value.
As of press time, neither company has confirmed the speculation. Zillow itself bought New York-targeted real estate site StreetEasy for $50 million in 2013, and recently purchased Retsly Software Inc. in early July. It won't be too surprising if Zillow is to buy Trulia soon. The agreement may be posted next week.
However, insiders at Zillow and Trulia selling shares of their companies along with Zillow-Trulia acquisition rumor seems a little bit odd. Zillow's CEO Spencer Rascoff unloaded $19.9 million in stock, and the reason to unload shares is unclear.
The market does not usually fall so hard unless there's some validity to a rumor like this, and the speculation on the buyout could very well be feasible. Both companies have done quite well in the past few months. In 2014, Trulia's stock gained 52% so far, and the divisive Zillow has gone up as much as 76%. Trulia booked its revenue to rise 76% this year, and Zillow's annual revenue is expected to rise 58% over last year. Zillow's monthly unique users grew by 51% to more than 70 million in the last quarter, and Trulia grew 42% to 44.6 million.
Trulia and Zillow are the most-visited U.S. real estate sites now. CEO of Trulia Sean Aggarwal said at the Bank of America Merrill Lynch Global Technology Conference in June that they saw this as a two-player market. Looking forward, if the rumor turns out to be true, the combination will inevitably dominate the industry.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer