Zillow: IPO Darling or Housing Bubble Mimic
Offered at $20 per share, Zillow soared to $60 per share on opening day but then settled down to close at $35.77. For those who paid $60, I’ve got some Florida property to sell you.
Palm Coast, FL – July 21, 2011 – Today, we witnessed something akin to a Ginn or Reynolds Plantation priority selection event; otherwise known as a sales launch. Eager buyers queued up to plop down their money for shares of Zillow, the unprofitable internet company that provides consumers not so accurate estimates of home values. Shares released at $20 each were quickly trading at $60. By day’s end, they had dropped to close at $35.77. That price puts a market value for the company at about $959 million. It’s at $33.20 per share in after-hours trading.
The Zillow offering is reminiscent of internet grocer, Webvan whose market cap reached $8 billion before the company flamed along with others in the dot com bubble. Like Zillow, Webvan was never able to prove its business model could be profitable.
Zillow trades on the Nasdaq stock market under the trading symbol Z.
Perhaps PT Barnum was right. Time will tell. For those who paid $60 per share today, I’ve got some Florida property to sell you; or maybe a website.
Flaming
Zillow could have had the world at their finger tips. Everyone was talking about zillow, with Trulia not far behind. It was the future that was going to sink all the MLS’s of the world. It had made the MLS obsolete. Then they started charging for it. It could have been the next Angie’s List. Once they decided to charge for it, the MLS came rising back from the dead. Zillow is better for a listing agent than advertising in a Homes and Land print book or something like it, but I thought they could have made a killing on advertising and leaving it free. They could have cornered the market, but instead they kept the MLS, Trulia and a host of similar site alive and well with the decision to charge.
BUBBLE!
Clearly a bubble. You and I are in the business. SUCCESSFUL real estate transactions that actually close are hard hard work. Zillow is just another prospecting tool. How much can they actually charge and therfore make in real dollars profit?
Real Value
In the end, the cap or market value of Zillow will depend on what value, if any, it adds to a typical real estate transaction. If they add value, they have to figure our a formula that will compensate them for their contribution. This is not easy. I’m still struggling with the issue myself.