Zillow Shares Slip Lower After Pricing Public Offering at $82 Per Share

Andrew Klips |

Shares of online real estate company Zillow, Inc. (Z) are trading  down more than 4 percent in early action on Tuesday after the company said late Monday that it is offering about five million shares of its common stock at $82 each.  The original announcement of the proposal was made Monday morning, but didn’t include pricing, which is coming at a 10 percent discount from Friday’s closing price.

Zillow will be putting up 2.5 million of the shares for $205 million and certain existing shareholders will offer 2.52 million shares.  Underwriters will have the option to buy an additional 753,522 shares from Zillow.  Zillow will not receive any of the proceeds from shares sold by existing shareholders. Citigroup (C) is the lead underwriter with Goldman Sachs (GS) , Allen & Co. LLC and others also involved.

The company intends to use the proceeds for general corporate purposes and possibly acquisition costs or technology investments , amongst other things.

Zillow currently has about 34.55 million shares outstanding.

The offering news comes on the heels of Seattle-based Zillow announcing on Monday that it is spending $50 million in cash to buy StreetEasy, a leading website canvasing properties for sale and rent in New York City.  The move comes as Zillow continues to try and fend off smaller competitors like Trulia Inc. (TRLA) and Move, Inc. (MOVE) .

Zillow chief executive Spencer Rascoff said that StreetEasy has “cracked the code in New York” with a “local network effect where nearly every New York broker is active on StreetEasy because of the site's large audience and comprehensive data."

Earlier this month, Zillow beat Wall Street expectations for the second quarter, although it swung to a loss on record revenue, largely because of a $7.1-million charge related to a prior acquisition.  For the quarter, the company reported revenue of $46.92 million, which was nearly 70 percent higher than the year prior quarter.  Net loss totaled $10.23 million, or 30 cents per share, down from a profit of $1.33 million in the second quarter of 2012.

The company said that web traffic hit an all-time high of 61 million users in July.

Zillow generates a good chunk of its revenue by selling listing services and market data to residential brokers, so the recovering housing industry has boded well sales.  In May, existing home sales hit a 3-1/2 year high at an annual pace of 5.14 million, although sales pulled-back a bit in June to an annualized rate of 5.08 million.  July’s sales are slated to be delivered by the National Association of Realtors Wednesday morning.  On Friday, the Commerce Department will announce new home sales for July.  In June, new home sales hit an annual rate of 497,000, the highest level since May 2008.

Shares of Zillow had more than tripled in 2013 at highs of $97.29 on August 9.  Since, shares have taken a downward turn, printing as low as $79.99 in trading this morning.

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Symbol Name Price Change % Volume
C Citigroup Inc. 49.58 0.01 0.02 10,753,347
GS The Goldman Sachs Group Inc. 175.12 0.45 0.26 1,943,125
IEVM Integrated Envr Techs Ltd 0.01 0.00 0.00 810,000
Z Zillow Group Inc. 34.34 0.48 1.42 532,572


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