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Quick Question on Zillow's IPO

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Team Zillow in Times Square for IPO.

As I’m sure you all have heard by now, Zillow has gone public this morning and at least the first day’s worth of trading has been beyond anyone’s wildest expectations. Zillow priced its offering at $20 per share, way above the original $12-14 range, and in immediate trading, the stock went as high as $60. It is unknown where it will settle, but… that’s now a game for Wall Street traders.

I did have a quick question for y’all, though, because some of you are really smart folks in the real estate industry. This paragraph from GigaOM:

And all this from a company that has yet to turn a profit. Zillow made nearly $30.5 million in revenue in 2010, but ultimately posted a net loss of about $6.8 million for the year, according to regulatory filings. Ostensibly, the $70 million Zillow made in Wednesday morning’s IPO will be put toward initiatives that will boost the business’ bottom line.

So… what initiatives was Zillow unable to do in the past to boost the bottom line that it will now be able to do with an extra $70 million in funding? How do you think Spencer and team will spend that money to improve profitability?

Marketing? Technology? More salespeople? What would Zillow have to do to become more valuable/extract more money from the real estate broker/agent?

Speculate away! I doubt we’ll get authoritative answers from anyone at NASDAQ: Z since those are forward-looking statements. 🙂 I’m curious what the community thinks these initiatives will be.

-rsh

 

 

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Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called “a revolutionary in a really nice suit”, people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

5 COMMENTS

  1. Michael’s comment sounds right – but having new currency to go shopping isn’t so bad either.  Hey Zillow we’ll take your stock (we may write in-the-money calls against it – but we’ll take it).

  2. Also keep in mind that as a publicly traded company, their employee stock option incentives will likely look better since there are real market numbers attached to those shares now.

  3. Rob,

    You wondered if I thought Zillow was more valuable than Realogy or Move.com.  After some more thought – in actual monetary value I’m not sure.  But, today I’m not sure Apollo could even launch a successful IPO for Realogy (after paying $9B in 2006) and what is Move.com without Realtor.com?  Could Move even spin off Realtor.com without NAR and its member’s approval?

    As a broker, I would hope that Realtor.com could be spun off – wouldn’t us (brokers) as NAR members participate in the event?

    FYI – I am not an expert on the structure of these companies – so, if I may be off base in terms of their structures.  Hopefully someone will correct me if my thoughts are incorrect.

    Thanks,

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