Zillow’s stock market fortunes are on the rebound after the real estate giant significantly reduced its Zillow Offers inventory and began buying back $750 million of its own Class A common stock and Class C capital stock.
The portal’s stock jumped 8 percent to $58.67 per share at market open on Friday following news that half of its Zillow Offers portfolio was in the process of being unloaded. It also benefited from an upgraded fourth-quarter outlook that boosted the Homes segment revenue 38 percent to $2.9 billion. However, according to Bloomberg, Zillow’s stock is still down 60 percent year-to-date.
“We are pleased with the progress of our wind-down efforts and recognize that no longer operating Zillow Offers will allow us to have a more capital-efficient balance sheet and business moving forward,” said Zillow Group co-founder and CEO Rich Barton in a statement on Thursday. “With that, we see today as an opportune time to announce a share repurchase program and reduce the cash balance we built up to support Zillow Offers.”
Even with this small victory in the books, Zillow still has a long and potentially difficult road to shutting Zillow Offers’ doors for good.
Based on figures from two previous Inman articles, Zillow should have approximately 8,800 homes left to sell. The portal had 9,790 homes in its inventory at the end of September, with contracts to purchase another 8,172 homes. However, the portal has canceled 400 homeowners’ contracts over the past several weeks, whittling Zillow’s available housing stock down to at least 8,781 homes.
In addition to the blowback surrounding contract cancellations, the company is juggling multiple securities fraud lawsuits and facing scrutiny over selling large swaths of its stock to institutional investors, namely New York City-based Pretium Partners who have been under fire for poor property management and alleged predatory behavior.
Zillow spokespeople have reiterated their confidence in the wind-down process to Inman several times, saying they’re doing their best to serve homeowners, homesellers, homebuyers and employees who will be impacted by the iBuyers’ closure.
“We are pleased with the significant Zillow Offers inventory wind-down progress we’ve made in such a short time,” Zillow Group CFO Allen Parker told Inman on Thursday. “We will continue to be disciplined in our inventory wind-down strategy and evaluate a variety of options to best optimize net cash flows to the company.”
“The company continues to expect the net impact of the Zillow Offers wind-down of inventory (including inventory losses), operating costs, and restructuring costs in the aggregate, to be at least cash-flow neutral, including after repaying all Zillow Offers secured debt, which was $2.9 billion as of Sept. 30, 2021,” Parker added.
Whether Zillow’s stock buy-back plan and breakneck Zillow Offers progress will be the solution it needs to bounce back to 2020 levels has yet to be seen. However, a previous Inman article explained Zillow’s stock buy-backs are a commonly-used strategy to lift struggling stock values and improve a company’s earnings per share ratio.
