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Zillow, Trulia add to gains amid positive merger commentary

  • "It's a blockbuster ... What this says is, Zillow has been and has locked up the absolute dominant position in online real estate in the United States,” says real estate analyst Steve Murray on reports Zillow (Z +4.6%) is looking to acquire Trulia (TRLA +2%).
  • Barclays' Christopher Merwin predicts a merger would "dramatically increase the combined entity's pricing power" with real estate agents, and would yield more leverage in price negotiations with MLSs. Zillow just bought MLS data-integration software platform provider Retsly.
  • Murray admits there could be a backlash to the deal, stating "the industry will be concerned ... if you have one huge, overwhelmingly dominant player" for whom agents "will be almost compelled" to list on.
  • Bloomberg reports Zillow could pay for 1/3 of the purchase in cash (implies a $667M cash payment at a $2B acquisition price), and 2/3 in stock. Zillow had $446M in cash/investments at the end of Q1.
  • While Zillow and Trulia continue to rally, Move (MOVE -2.8%) is now below where it traded before the first merger report broke.
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Comments (9)
  • mlauritz
    , contributor
    Comments (354) | Send Message
     
    "It's a blockbuster ... " Alright.

     

    If it actually happens - The Z + TRLA Mega Bubble Equity [Z] will be one of the Biggest Stars of the upcoming Bear Market Show.

     

    People always seem to miss the signs of the business cycle turning over; Real Estate Data is showing the RE Market is heading South Fast; Rates are going to have to go North and Mortgages & Re-Financing are already drying up.

     

    Investing in the combination of 2 massively overvalued & perpetually unprofitable businesses that are dependent upon Real Estate activity as the business Catalyst sounds like the worst idea possible right now. Zillow Business Model is completely broken & management knows it: Hence the barrage of very expensive ad space simply to drive Revenues for the Bull Market Show.

     

    Zillow & Trulia Insiders have been dropping their stock like Crazy - If CEO Rascoff is immediately dumping every share he ever comes across, why should "Investors" be so bullish?

     

    Use you head people - don't baghold the ultimate Trash :(
    25 Jul, 02:15 PM Reply Like
  • Eric Milner
    , contributor
    Comments (33) | Send Message
     
    Well said mlauritz, couldn't agree more.
    25 Jul, 02:31 PM Reply Like
  • Mark Krieger
    , contributor
    Comments (3992) | Send Message
     
    $667 m cash payment? They only have $446 m in cash, so (z) they will have to borrow the difference.
    25 Jul, 05:48 PM Reply Like
  • Charles Moscoe
    , contributor
    Comments (1578) | Send Message
     
    Z is shaping up to be the short of the century. Its now my largest short position and while I was early and now a little underwater (in at $146), it will be the trade of the year. I don't expect this to just drop in half but I really believe it will trade back down to below $30 again. With FY2014 earnings projected to be less than $10M, even valuing it at $30 is super expensive at 100x forward earnings 3.5x forward sales. I wouldn't even consider buying this stock for over $15. So consider that on how remarkably expensive it is. And growth is slowing. It is increasing but at a decreasing rate. What the analysts have to say about the Trulia deal is simply noise. First of all it is all rumors, second of all we don't even know if it will be a net positive for Z and my guess it is a net negative. I may have to just man up and add to my short next week and close my eyes for a little while. I will add a Trulia short next week also, remember that company where the insiders were dumping shares at $15.
    25 Jul, 06:41 PM Reply Like
  • Gettin'Long
    , contributor
    Comments (189) | Send Message
     
    I'm with you Charles, it's one of my biggest positions for me, short or long. The squeeze could really hurt but I plan to add, although it's sucking the life out of my margin surplus. Who will cry uncle first?
    26 Jul, 01:25 AM Reply Like
  • Charles Moscoe
    , contributor
    Comments (1578) | Send Message
     
    My guess (purely speculation) is the deal will happen but Z will sell off remarkably on the news. Other option is that deal doesnt happen and Z will naturally sell off also. This is the final stage of this pump either way. Market works in strange ways so I always try to expect the unexpected. Would not be surprised to see a test of $100 in August. I will lighten up around there but will hold a core short until the teens as I believe it will ultimately go back there. It is likely the most overvalued company in the universe that trades on pure hype. The longs dont even understand the product and how the company can never make anywhere near the amount of money required to sustain a valuation of even 1/10 of where it is currently trading.
    26 Jul, 07:26 AM Reply Like
  • 81george
    , contributor
    Comments (276) | Send Message
     
    Two wrongs doesn't make it right, despite all the hype around the deal. Even if they manage to cut 150 million in overhead expenses, as projected, the growth rate will never support the price. It's like a marriage of two losers, will never make a good and healthy family.
    26 Jul, 09:19 AM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (11136) | Send Message
     
    I look forward to when real estate prices are transparent enough online that banks can't claim disused houses they hold can't be valued and thus should not be market to market so they can hold them at a fake value without a loss and let them rot as people go homeless.

     

    Aside from that, I look forward to tougher online competitors that open the traditional, overpriced method of buying and selling houses to a more fair and equitable one even if housing prices fall with open transparent information.
    27 Jul, 12:36 AM Reply Like
  • drax7
    , contributor
    Comments (265) | Send Message
     
    The 6 percent commission business will be the casualty , Z can disrupt this industry. The beauty is that the shorts will pay for it.
    27 Jul, 08:13 AM Reply Like
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