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Zillow Group Inc Down on Theft Allegations (Z)

Zillow Group Inc (NASDAQ:Z), the online real estate and home information marketplace operator, has been accused of stealing listing data and information from competitors’ websites. An anonymous whistleblower claims to be in possession of specific information concerning possible illegal actions on the part of Zillow. A court filing by direct rivals and MOVE, states that they received a letter from an anonymous employee indicating that Zillow Chief Development Officer Errol Samuelson stole “multiple documents and entire databases” while working at MOVE.

As a result, Zillow shares continued the downtrend from mid-February highs. The stock is down 12% YTD and nearly 5% for April 13th trading day.

Back story

MOVE and the National Association of Realtors filed a lawsuit against Zillow back in early March, after their then-Chief Strategy Officer Samuelson, alleged a breach of contract, fiduciary duty and misappropriation of trade secrets. The lawsuit states that the sensitive information in his possession makes it impossible for him to work at Zillow without revealing those secrets.

MOVE and have been complaining for a while that the defendants are “systematically hiding evidence in secret non-Zillow email accounts and file-sharing services” while dismissing all claims as conspiracy theories.

Supportive Evidence

These newly surfaced allegations support and substantiate the previous claims and are a clear sign that Zillow’s legal troubles won’t dissipate anytime soon. In addition to accusations of theft, the letter also alleges the following:

  • Errol Samuelson was working covertly at Zillow while under court injunction
  • Zillow employed offshore labor that used secret software called “LSS” and “LSS v2” to steal data in order to benchmark their listings.
  • VP of Industry Development Curt Beardsley has copies of MOVE’s private MLS listings database hidden away on his Google Docs account to conceal and keep it off his work computer.

When asked if the accusations had merit Zillow responded: “Zillow has acted and will continue to act with the utmost integrity in conducting its business and in defending this litigation. This letter is unsigned and unsubstantiated with a mix of mischaracterized facts and false information.”

Rough time since acquisition

Z shares have decreased more than 22% since February’s much hyped acquisition of Trulia after a string of analyst downgrades. Zillow has experienced a strong deceleration in revenues and metrics, with their Pro-Forma Combined Operating loss increasing 4% to 17% of sales (above) since the deal. Disruptions in real estate listings were the primary cause behind their lagging growth.

Following the Trulia merge, a disagreement concerning listings with Listhub (which is owned by competitor resulted in the listings contract ending prematurely and Zillow having to increase efforts to acquire listings directly from MLS. These recent misfortunes will provide fodder to the finger pointers who can now present a juicy motive.


Even with the potential legal troubles looming, now would not be the moment to sell Zillow if you bought at the peak. Zillow is seasonal and thus trading favors the real estate peak. The ideal strategy would be to purchase the stock in November/December and sell in early fall after the real estate season peaks. However, the disappointing post-merger numbers, impending lawsuit and slow down of the large-cap internet sector add risk to holding Zillow.

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