The parent company of property portal Homes.com said the “investment phase” was over and it was too early to sell or abandon the site.
CoStar Inc. continued its defense against two activist investors who issued a scathing open letter urging the company to stop entering the residential real estate market through the Homes.com portal it acquired five years ago.
New York City-based hedge fund DE Shaw & Co. on Wednesday released an open letter to CoStar’s board of directors regarding the company’s “reckless expenditure of stockholders’ capital and refusal to address the company’s long-standing and significant underperformance.” This is the second shareholder in recent weeks to call for the replacement of a majority of CoStar board members. Investor Third Point made similar criticisms late last month.
And for the second time in recent weeks, CoStar has issued a public response defending its position as a competitor in the housing portal market.
“Abandoning Homes.com, as DE Shaw and Third Point suggest, would irreparably harm our entire business and lead to certain and significant value destruction,” CoStar wrote in Thursday’s response. “The attempt by DE Shaw and Third Point to prescribe a cure for separation, divestment, or amputation misdiagnoses an imaginary patient and amounts to activist malpractice.”
CoStar is significantly reducing spending on Homes.com, starting with more than $300 million in savings this year and cutting more than $100 million each year through 2030. The company characterized the spending cuts as the end of an “investment phase” in which it spent billions of dollars on Homes.com.
The company said it made the changes after dialogue with its top shareholders, who hold more than three-quarters of the company’s shares.
“The reality is that CoStar Group’s management and board have worked to ensure that DE Shaw understands Homes.com’s value creation potential and the fact that the company is committed to a responsible plan to realize it,” CoStar wrote. The letter was first reported by Real Estate News.
Mr. Third Point and Mr. DE Shaw generally criticized CoStar’s insistence on investing in “loss-making” Homes.com, which will cost more than $3 billion by the end of 2026, while diverting resources from its core commercial business.
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