Zillow Follows StreetEasy Deal With Public Stock Offering
Zillow Inc. (Z), operator of the largest U.S. real-estate website, announced a $412 million share sale on the heels of its plans to buy New York startup StreetEasy.
Zillow and certain shareholders are selling 5.02 million shares at $82 apiece, the Seattle-based company said after the close of trading yesterday, a 3.2 percent discount to the stock’s closing price. Earlier, Zillow said it’s buying StreetEasy, a residential real-estate site with about 1.2 million monthly unique users, for $50 million in cash.
Facing increased competition from Trulia Inc. and other real-estate listings providers as the U.S. housing-market recovers, Zillow has been making acquisitions to maintain growth. Chief Executive Officer Spencer Rascoff said purchasing StreetEasy can help Zillow rapidly expand its presence in the largest U.S. market and use its sales team to bolster advertising and subscription revenue faster than StreetEasy could as an independent company.
“You can’t lay claim to being the No. 1 real-estate site nationwide without being No. 1 in New York,” Rascoff said in an interview. “We’ve coveted StreetEasy for several years.”
Zillow, which bought San Francisco-based HotPads in December for $16 million in cash, said it may use proceeds from the share offering to make deals that complement its business. It’s the company’s second stock sale since the initial public offering in 2011, and Citigroup Inc. (C) has led all three.
The shares fell 4.8 percent to $80.71 at the close in New York. The stock has almost tripled this year.
Founded in 2006, closely-held StreetEasy has 34 employees and provides for-sale and for-rent listings through partnerships with the largest brokerages in New York. The deal is expected to close in the next few weeks. Zillow’s 20 employees in New York will move into StreetEasy’s office, Rascoff said.
Rascoff is betting on a rebound of the U.S. real-estate market and said his product is a “friend” to brokers who use Zillow to connect with clients.
“The real-estate market is very hot,” Rascoff said on Bloomberg’s “Surveillance” program with Tom Keene, Sara Eisen and Scarlet Fu. “The market is back and the parts of the country that have bounced back the most were the ones that were in the doldrums.”
Most of StreetEasy’s employees are equity holders in the company, said Dawn Lyon, a spokeswoman for Seattle-based Zillow. StreetEasy had about $2.9 million of venture capital backing from investment firm FA Technology Ventures, she said.
The StreetEasy purchase “opens the door to potentially lead the New York City market,” said James Cakmak, an analyst at Telsey Advisory Group in New York. “But they’re paying $50 million dollars for about 1 million users, and that’s a little expensive.”
Zillow reported 61 million unique visitors at the end of July. The acquisition will allow Zillow to expand into the rentals market, and the company will probably use the stock offering to help pay for it, said Cakmak. His company doesn’t have a rating system.
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