Zillow agrees to $212.5 million settlement in iBuying shareholder case

Article Summary

A shareholder suit was first brought in federal court in Washington state after Zillow shut down its iBuying business, Zillow Offers. The complaint says that, as Zillow expanded the unit, the company and some executives made misleading statements and left out key information about home-purchase volume, pricing accuracy and operational progress, which allegedly pushed the stock higher.

The lawsuit says Zillow's shares dropped after the company announced it would wind down Zillow Offers because of uncertainty in predicting home values, reduce its workforce by 25% and take a $304 million charge tied to homes bought in the third quarter. Zillow also told investors it expected an additional loss of $240 million to $265 million on homes it planned to buy in the following quarter.

Hagens Berman, the plaintiffs' firm that also handled the Moehrl commission case, served as court-appointed class counsel in the Jaeger action. The firm said the $212.5 million settlement could be the largest single securities settlement ever in the Western District of Washington. Zillow said about $48 million of the payment is expected to come from insurance.

Under the deal, Zillow will place the $212.5 million into an escrow account within 20 business days after the court grants preliminary approval. The money will be used for notice and administration expenses, court-approved attorneys' fees and costs, and cash payments to eligible class members.

The agreement includes no admission of liability or wrongdoing by Zillow or any other defendant. It also does not settle related shareholder derivative cases, which are still pending.

The settlement class includes everyone who bought or otherwise acquired Zillow Class A common stock or Class C capital stock during the class period and claims to have been harmed. Excluded are Zillow's directors, officers, legal representatives, their immediate family members and certain related parties.

If the settlement takes effect, class members who do not properly opt out will release Zillow, the other defendants and certain related parties from claims that were or could have been brought based on the allegations in the case or the purchase or acquisition of Zillow shares during the class period.

What comes next

The agreement still needs court approval. Hagens Berman said it will seek preliminary approval, after which notice will go out to class members explaining how to file claims, object or opt out. A fairness hearing will then be held before the court decides whether to grant final approval.

If final approval is granted and any appeals are resolved, payments to eligible investors will be made under a court-approved allocation plan. Zillow said it plans to file the settlement agreement as an exhibit to its Form 10-K for the year ending Dec. 31, 2026.

“We are incredibly pleased to obtain this result for investors, what we believe to be the largest single securities settlement in Western District of Washington history,” Steve Berman, managing partner of Hagens Berman, said in a statement. “Our securities team works tirelessly to protect the rights of investors.”

Zillow did not immediately respond to HousingWire's request for comment.