Shares of Zillow Inc. fell this week after stock commentary website, CitronResearch.com, published a critical report (link opens PDF) on the property portal, stating that Zillow’s business prospects are dim and do not justify the rise in the stock's price since Zillow's initial public offering last year.
Citron Research claims that Zillow has been “telling a willowy story” to Wall Street, which is “completely inconsistent with company's underlying business metrics." Citron also said that Zillow "operates in a hotly competitive space without a sustainable advantage" and has a "business model that never worked."
"Investors really need to examine why they are paying such a nosebleed-high valuation for decelerating growth, especially in the face of the huge insider sales," Citron’s report concluded.
Citron is a short seller's research firm that publishes reports online about companies. Short sellers earn money when a stock declines. In its report, Citron said the purpose of its article was "not to cause a sudden drop in the stock price. Rather, we just want to be on the same side of the counter as management, the people who know best - we are net sellers of the stock."
Zillow went public in July 2011, with its stocks opening at $20; the stock has been one of the best-performing Internet IPOs in recent years, with its shares more than doubling since their debut (Zillow shares closed on Monday at $44.41). The Citron report comes a week after Zillow competitor Trulia went public.
A disclaimer on its website said Citron does not guarantee that it is providing all available information.
Original article by Associated Press can be read here.