By Jonathan Stempel
Oct 28 (Reuters) – Zillow said on Wednesday it will pay $212.5 million in cash to settle a class action accusing the online real estate marketplace of misleading shareholders about its failed Zillow Offers home-flipping venture.
The Seattle-based company did not admit wrongdoing in agreeing to the settlement, which requires a judge’s approval.
Zillow announced the settlement a little over three weeks after the US Supreme Court refused to hear its appeal from a lower court ruling allowing the case to proceed.
The lawsuit began after a 32% plunge in Zillow’s stock price over two days in November 2021.
That decline began after news surfaced that most homes in the Zillow Offers inventory were worth less than the company paid, and Zillow was looking to sell 7,000 homes.
Zillow then announced it would close Zillow Offers, take a $304 million writedown, and lay off 25% of its workforce.
Shareholders said they were defrauded into buying Zillow shares at inflated prices because the company’s leaders painted an overly positive picture of Zillow Offers.
Lawyers for Zillow denied accusations of securities fraud.
Zillow said insurance would cover about $48 million of the payout, and some of the payout would be used to pay the shareholders’ lawyers.
Steve Berman, a lawyer for the shareholders, said he believed the securities settlement was the largest in the federal court district that includes Seattle, where the case was filed.
(Reporting by Jonathan Stempel in New York; Editing by Matthew Lewis)
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