In one of the hottest housing markets in history and strongest stock markets in a decade, one basket of stocks has been a disaster.
Residential proptech went pop. All of the publicly traded companies have declined 65 to 75 percent in the last year, including Zillow, Redfin, Compass, eXp, Opendoor and Offerpad.
The recent technology stock sell off added to the carnage, but it began in proptech when market leader Zillow began to stumble last year.
The Seattle-based portal lost $35 billion in market value in the past 12 months.
Zillow reports its 2021 year end and fourth-quarter earnings on Thursday. Many analysts are not expecting a pretty picture, as the company has given subdued guidance about expected results.
Zillow’s iBuyer disaster dragged everyone down. It was both the market leader and thought leader, and suddenly the North Star went dark.
One year ago, Offerpad got swept up in the SPAC mania and hooked up with former Zillow CEO Spencer Rascoff’s SuperNova SPAC. It went public September 2, 2021. Since then, the stock has cratered, down 63 percent.
Others have faced the same fate.
Opendoor is down 64 percent, Compass 59 percent, eXp is off 63 percent and Redfin is down 59 percent, all from their 52-week highs.
Collectively, $90 billion in shareholder value has been wiped out in the last year.
During the same period, Realogy is down a mere 3 percent.
“It has real earnings and is not burning cash and losing money” like the proptech companies, said John Campbell, managing director of equity research at Stephen’s Inc.
Other real estate companies like data firm Black Knight are down 19 percent and RE/MAX is off 25 percent.
What went wrong? What does it mean for innovation?
The pressure for high-growth tech companies to get profitable is an overall theme in the technology sector this year.
“The digital fear factor has never been higher,” Campbell said.
Plus, many on Wall Street are convinced that the housing market is in a bubble. And it fears a replay of 2008 when the property market collapsed.
The proptech malaise has collateral damage. When their stocks are depressed, many companies cease acquisitions, so burgeoning proptech startups have fewer exit opportunities.
Plus, venture capitalists start to give the sector the stink eye and it becomes more difficult for entrepreneurs to raise their next round of funding.
The survivors are those startups with a big wad of cash in the bank from their last funding round. The wise ones will reduce costs, so they don’t run out of money.
Job cuts follow.
It’s not a pretty picture.
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