Zillow will pay $212.5 million in cash to settle a shareholder lawsuit over Zillow Offers, the home-flipping business it shut down in 2021. The company disclosed the Zillow settlement in an SEC filing, and Reuters first reported it on Wednesday.
The suit goes back to November 2021. Zillow’s stock dropped 32% over two days, and then the company said it would close Zillow Offers, take a $304 million writedown and lay off 25% of its workforce, according to Reuters. Shareholders sued the same month, arguing Zillow had not been upfront about how unpredictable its home-price forecasts were.
The settlement
The deal resolves all claims against all defendants in Jaeger v. Zillow Group, a securities class action in federal court in Washington state. Shareholders said they were misled into buying stock at inflated prices because executives painted too rosy a picture of Zillow Offers. Zillow’s lawyers denied the fraud accusations, and the settlement includes no admission of wrongdoing, according to GeekWire.
So how does the money move? Zillow pays $212.5 million into an escrow fund within 20 business days after the court gives preliminary approval. Insurance should cover about $48 million of that.
The fund then pays for notice and administration costs, court-approved attorneys’ fees, and payments to eligible shareholders.
A Zillow spokesperson said the company is “pleased that the parties have reached a resolution on the matter.” (Pleased, apparently, is what a nine-figure check feels like.)
How Zillow Offers fell apart before the class action settlement
Zillow fought the case for nearly five years. About three weeks ago, the U.S. Supreme Court declined to hear its challenge to the case’s class status.
The justices passed, and now the company is writing the check. The housing market has handed plenty of people expensive lessons lately, from billion-dollar mortgage lawsuits to rates that refuse to chill.
Here’s the thing about the $212.5 million Zillow shareholder settlement
Steve Berman, managing partner at class counsel Hagens Berman, said the firm is “incredibly pleased to obtain this result for investors,” per Real Estate News.
If you owned Zillow stock back then, this is the part that matters. A judge has to sign off before anyone knows the final amount or what each eligible shareholder actually receives. Meanwhile, Zillow shares slipped about 4% on the news, Reuters reported.
Buyers feeling the squeeze from 7.5% mortgage rates may find little sympathy for a company that bet big on flipping homes.
What happens next after the Zillow lawsuit settlement
The court has to grant preliminary approval before any money moves. The filings did not say when that hearing will happen. Separate shareholder derivative suits, filed on the company’s behalf against its leaders, are still pending. In other words, the Zillow settlement closes one chapter, but not the whole book.
Zillow is done flipping homes, but the bill for trying keeps showing up.
