D.E. Shaw Joins Shareholder Revolt as Pressure Mounts on CoStar Board

CoStar Group is facing a second activist broadside in as many weeks, this time from New York-based investment firm D.E. Shaw, which has published a sharply worded open letter accusing the board of weak oversight, excessive deference to management, and prolonged shareholder value destruction linked to Homes.com.

The letter, dated February 4th, is similar in tone to a similar missive published last week by hedge fund Third Point and adds further momentum to what is rapidly becoming a full-blown public spat. Like Third Point, D.E. Shaw is a significant shareholder and was instrumental in the creation of CoStar’s Capital Allocation Committee in April 2025.

While the broad thrust of the criticism is similar in saying that CoStar’s aggressive and costly push into US residential via Homes.com has failed to deliver acceptable returns, D.E. Shaw’s letter goes further in describing what it characterises as a board effectively captured by founder and CEO Andy Florance. Referring to a meeting held with CoStar Group's board two weeks ago, the letter states,

“the Board demonstrated a troubling disregard for shareholders and the value destruction they have endured,”

“Rather than acknowledging that Homes.com has failed to meet expectations and driven unacceptable shareholder losses, the Board dismissed our concerns and reaffirmed its commitment to Homes.com.”

The investor claims it proposed two specific actions during that meeting: developing an alternative strategy for Homes.com, including a potential exit or spin-off, and augmenting the board with new independent directors. According to the letter, both suggestions were rebuffed.

More strikingly, D.E. Shaw alleges that the board refused a request to meet with independent directors without Mr Florance present.

“In doing so, the independent directors confirmed what we have long suspected, they are far too deferential to Mr. Florance and incapable of providing effective oversight or holding him accountable,”

“In our view, the ‘independent’ directors have surrendered too much authority to the CEO they are tasked with overseeing.”

The letter repeatedly frames these claims as D.E. Shaw’s view and interpretation of events. CoStar has not publicly responded to the D.E. Shaw letter at the time of writing.

As with Third Point, Homes.com sits at the centre of the dispute. D.E. Shaw estimates that CoStar will have spent more than $3 billion on Homes.com by the end of 2026, generating roughly $80 million in annual revenue and more than $2 billion in cumulative losses. The firm argues that this spending has diverted management attention and sales resources away from CoStar’s core commercial businesses, contributing to slower growth and margin pressure.

“Today every shareholder who has purchased CoStar’s stock in the last five years has lost money,” the letter claims, pointing to a cumulative share price decline of 32% over that period, compared with a 101% gain for the S&P 500.

D.E. Shaw also takes aim at executive compensation, alleging a severe misalignment between pay and performance. “Over the last five years, Mr. Florance’s annual cash and equity incentive awards have paid out at 200% of target each year,” the firm writes, estimating total compensation of approximately $130 million. It further alleges the board has enabled “lavish perquisites at shareholder expense,” including personal use of private jets.

These allegations echo, and in some areas amplify, Third Point’s description of what it called a board of “supine enablers”. CoStar has previously rejected that characterisation, stating that its strategy and capital allocation plans were unanimously approved by the board and Capital Allocation Committee, including directors nominated by Third Point and D.E. Shaw.

The escalation is notable given CoStar’s recent decision to rein in Homes.com spending, cutting net investment by more than $300 million in 2026 and targeting breakeven exiting 2029. Both activist investors argue that this timetable remains unacceptable and that the underlying strategy is fundamentally flawed.

D.E. Shaw concludes by signalling support for “shareholder driven change” at CoStar’s 2026 Annual Meeting. With two prominent investors now publicly aligned in their criticism, pressure on CoStar’s board and leadership is unlikely to ease any time soon.