Zillow bought roughly 9,700 homes in the third quarter, due to what it called “higher-than-anticipated conversion rates.” It also booked a $304 million writedown on inventory owned at the end of the period “as a result of unintentionally purchasing homes at higher prices” than the company now thinks it can sell them for.įollowing the company’s decision to halt new purchases, it became clear that Zillow had misjudged the housing market, tweaking its algorithms to make more aggressive offers just as competitors Opendoor Technologies Inc. and Citigroup Inc.Īs recently as August, Barton was boasting about the popularity of the service, telling investors that the traditional way of selling a home was so “dreadful and dreaded” that customers were willing to bypass potential bidding wars to sell to Zillow “in this sizzling-hot sellers market.” It has also lined up $500 million credit facilities with Credit Suisse Group AG, Goldman Sachs Group Inc. Barton set an ambitious goal, seeking to buy 5,000 homes a month by 2024.Įarlier this year, the company borrowed more than $1 billion through two bond offerings, making it the first iBuyer to tap the securitization market. In the new business, Zillow used pricing algorithms to buy homes from their owners, make light repairs, and put them back on the market. In 2019, Barton told investors he expected Zillow Offers to generate $20 billion a year in revenue within three to five years - about 15 times the firm’s 2018 total revenue. In 2018, Barton, one of the company’s founders, reclaimed the role of CEO and pivoted into the high-tech home-flipping business, called iBuying. Then came news on Monday that it was marketing 7,000 homes for roughly $2.8 billion to institutional investors.įor most of Zillow’s 15-year history, the company has been known for publishing online real estate listings and home-price estimates - called Zestimates - and seeking to profit by connecting agents with potential clients. 18 that it wouldn’t make any new offers on houses for the rest of the year as it struggled to find workers to fix the homes it had under contract. The group’s credit default swaps, measuring the cost of insuring its debt, surged by almost 40 basis points (bps) to 111/136 bps, which means it would cost around $111,000-136,000 a year for 5 years for insuring $10 million in bonds.“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated, and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility,” Chief Executive Officer Rich Barton said in the company’s earnings statement. “ Toshiba's ability to enhance its shareholders' equity is likely to continue to be difficult for the foreseeable future,” S&P said. The rating agency said the projected shareholder’s equity fell drastically as a consequence of the writedown, wearing away the resilience of the group, whereas it is expected that the higher working capital would lead to burning of more cash. The rating agency, Standard & Poor's (S&P) downgraded the company, which is already in lower territory, from B to B (-), with a ‘negative’ outlook. The group’s value, for the first time in 7 years, dropped below its tech rival Sharp Corporation. Investors are worried that a hit to the finances of the group could also weaken its competitiveness in its key semiconductor business, specially the investment in 3D NAND, a type of flash memory. This follows a drop of 12% on Monday after early warning signs from the group. On the other hand, the shares of Toshiba took a hit on Wednesday, declining 20% at the Tokyo stock exchange. It said that this could take time until February to know the exact impact. However the company did not state whether that would write off the value of its assets but hinted that it would impact its net worth. The Japanese major in a media statement on Tuesday said that “cost overruns a nuclear business in US it purchased from engineering company Chicago Bridge & Iron (CB&I) last year, Stone & Webster, which meant the company could face charges of several billion dollars,” leading to a bruising overpayment. Toshiba’s shares took a hit on Wednesday, declining 20% at Tokyo stock exchange.Īn impending writedown at Japanese multinational Toshiba Corp has written off around $5 billion of its value in just two days that led to a downgrade of its credit rating on Wednesday, as the conglomerate was coping to bridge a potential multi-billion dollar gap.
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