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Zillow slapped with first federal lawsuit from shareholders over home-flipping business flop
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Zillow is facing a new federal lawsuit alleging the real estate company misled investors and caused them great financial losses before its house flipping business folded amid increased unpredictability in the market.
The lawsuit filed Tuesday in U.S. District Court for the Western District of Washington at Seattle alleges that Zillow made "materially false and/or misleading statements, as well as failed to disclose material adverse facts about the company’s business, operations, and prospects." The filing is the first federal case opened regarding Zillow Offers, as two other Boston-based law firms have also asked additional shareholders to come forward as they investigate lost money by investors, the Seattle Times reported.
ZILLOW QUITS HOME-FLIPPING BUSINESS, CITES INABILITY TO FORECAST PRICES
An investor named Dibakar Barua and others allege Zillow failed to disclose that, despite operational improvements, the company experienced significant unpredictability in forecasting home prices for its Zillow Offers business. That issue, combined with labor and supply shortages, led to a backlog of inventory.
Despite knowing the company was reasonably likely to wind down its Zillow Offers business, which would have an adverse impact on its financial results, Zillow made "positive statements about the company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis," the lawsuit filed in Seattle claims.
"As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages," the lawsuit continues.
The allegations came a day before Zillow announced it is moving forward with a plan to place Denver’s homeless population into vacant units, as city leaders cited housing affordability as one of the leading factors contributing to homelessness in the Colorado region.