Zillow to pay $212.5 million to settle class action over failed venture
Zillow just agreed to a $212.5 million cash settlement.
The short version
- The deal resolves investor lawsuits over its failed home-flipping venture.
- The company closed the risky program after taking heavy losses.
- Insurance will cover about $48 million of the massive payout.
Why it matters to you. If you hold shares in companies facing big legal battles, check your portfolio for unexpected drops.
Zillow, the online real estate marketplace, just agreed to pay $212.5 million in cash to settle a major class action lawsuit. The legal battle accused the Seattle-based company of misleading shareholders about its failed Zillow Offers home-flipping venture. The massive payout comes a little over three weeks after the US Supreme Court refused to hear an appeal from the company.
The lawsuit began after a stunning 32 percent plunge in Zillow's stock price over just two days in November 2021. That market decline kicked off when news surfaced that most homes in the Zillow Offers inventory were worth less than the company actually paid for them.
At the time, Zillow was desperately looking to unload 7,000 homes. The company then announced it would completely shut down the home-flipping venture, take a $304 million writedown, and lay off 25 percent of its workforce. Shareholders argued they were defrauded into buying shares at inflated prices because company leaders painted an overly positive picture of the troubled program.
Zillow did not admit any wrongdoing in agreeing to the settlement, which still requires a judge's approval. According to Insurance Journal, the company said insurance will cover about $48 million of the total payout. Steve Berman, a lawyer representing the shareholders, noted that the securities settlement is believed to be the largest in the federal court district that includes Seattle.
Photo: Joe Mabel, CC BY-SA 4.0, via Wikimedia Commons
