Everyone is a genius in a bull market. I remember a friend saying they were going to buy teslas to then re-sell them at a higher price around the same time because "teslas aren't like normal cars, they're an appreciating asset".

Thankfully he ended up not having enough money to pull this off so didn't lose everything either.

I don't understand how this was fraud against shareholders.

Zillow's plan was to offer to buy homes sight-unseen in targeted areas, using an algorithmic pricing scheme based almost entirely on location and limited home info. They hoped, I think, to gain substantially market power by owning a lot of the available inventory in the targeted areas.

Was it a stupid business plan? Yes, it was clearly a stupid businessplan. The plan invited an "adverse selection" effect wherein homeowners would accept their offers only if Zillow had offered substantially more than what the homeowners could reasonably expect to get on the open market.

I remember hearing a Marketplace radio segment on the program like a week after it launched, where it was completely obvious that this was going on.

It was a pretty clear business model, with a glaring and predictable flaw. Shareholders may have lost money, but I don't see how they were defrauded or misled.

These cases are so weird.

The share price fell, so lawyers race to the courthouse to file a class action suit, because there is a first-to-file doctrine for these types of cases.

Then they don't necessarily try and prove harm, they just want to settle & get paid for their own inflated costs.

Meanwhile, the people that they are supposedly representing, ie shareholders at the time of the fall, are overwhelimingly still shareholders. So any payout they get is from their own proportion of money they already own in the company, minus legal fees.

It does however screw foreign holders and a few other classes of shareholders, to the benefit of the lawyers, and to lower the loss the shareholders take by getting their own money back.

Couldn't happen to a better company

During the crazy low rates period, I built some CRM tools for some people where all they would do is make 50k offers a month on homes across the country on zillow at like ~85% market value, get some under contract and double close at 110% to opendoor, and they'd collect the 20% or so at closing. They just would put earnest money down. They made millions doing this before opendoor said something.

Seems like this whole thing burned capital to run a dealer desk writing underpriced puts

probably lower than their anthropic bill