Long-term shareholder Baillie Gifford has thrown its support behind CoStar Group as the real estate data provider faces mounting pressure from activist hedge funds led by Third Point and DE Shaw, according to a report by Bloomberg.
The activists have publicly criticised CoStar’s multibillion-dollar investment in loss-making residential listings platform Homes.com, calling for board changes and urging the company to consider divesting the asset to refocus on its core commercial real estate data business. Homes.com, acquired in 2020, generated around $90m in annual revenue and is not expected to reach profitability until 2029.
The dispute sets the stage for a potential proxy fight when CoStar’s board nomination window opens in mid-March. Third Point founder Daniel Loeb has suggested replacing a majority of the board and has sharply criticised founder and chief executive Andy Florance, describing the Homes.com expansion as poorly executed and strategically distracting.
Baillie Gifford, CoStar’s seventh-largest shareholder, defended management’s long-term strategy, arguing that the company has a track record of reinvesting to create shareholder value. The UK asset manager said Homes.com represents CoStar’s next major growth engine and could replicate the success of earlier offshoots such as Apartments.com and LoopNet.
Despite the backing, CoStar’s shares have fallen around 38% over the past year and have been broadly flat over the last five years. The company’s market capitalisation stood at roughly $19 billion at the end of last week.
Baillie Gifford also pointed to new AI capabilities being rolled out at Homes.com as a potential catalyst for accelerating growth and expanding its subscriber base, reinforcing its belief in the long-term opportunity.
