Stock prices of Internet software and services provider
) fell 7.1% to $84.74 at the closing bell on Aug 19, as the news
of a secondary offering to fund a big-ticket acquisition caused a
flutter in investor sentiment. The dip in stock price is
particularly worth noting given the fact that the stock has more
than tripled in the current year. Let's dig deeper into the
vagaries of the market.
In order to thwart stiff competition from
) and other real-estate listings, Zillow had been ramping up its
market presence through inorganic growth. In Dec 2012, the
company acquired HotPads.com, a map-based rental housing and real
estate search engine, for $16 million in cash. However, with a
healthy recovery in the housing market in the U.S., Zillow looked
to expand in urban markets like New York City, and the
acquisition of NY-based StreetEasy fit the bill.
Zillow acquired search site StreetEasy for $50 million in cash.
Since its inception in 2007, StreetEasy has offered users to view
for-sale and for-rental apartment listings in the city. It
provides a platform for resourceful information sharing among
prospective customers. With about 1.2 million monthly unique
visitors, StreetEasy has created a niche market for itself and
has expanded to 34 employees into a new 6,500-square-foot office
on Crosby Street in Manhattan's Soho neighborhood.
Zillow is likely to utilize the sales team of StreetEasy to
augment its advertising and subscription revenues that would
otherwise have not been possible as a standalone company.
Zillow announced a secondary offering of over 5.02 million shares
at $82 each. These included 2.5 million shares offered by Zillow
and 2.52 million shares offered by some existing shareholders.
The underwriters also have an option to purchase up to an
additional 753,522 shares from Zillow.
The secondary offering is the second of its kind since its
initial public offering in 2011.
) is serving as the lead book-running manager for the
Although the strategic purchase consolidates Zillow's market
position, it entails integration risks. Some industry experts
believe the purchase price of StreetEasy is also on the high
Zillow has a Zacks Rank #3 (Hold), while another player in the
) carries a Zacks Rank #2 (Buy).
(We are reissuing this article to correct some inaccuracies.
The original article, issued Tuesday, Aug 20, 2013, should no
longer be relied upon.)
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