Late last week, Zillow Group Inc. (NASDAQ:Z)(NASDAQ:ZG) announced two public offerings to raise a whopping $650 million -- half from issuing just over 5.7 million new Class C capital shares at $57 apiece and the other half in the form of 1.5% senior convertible notes due 2023. After accounting for costs and expenses from the offerings, that could bring Zillow's net windfall to nearly $725 million.

Between the added debt and incremental dilution from the new shares, the market unsurprisingly didn't take kindly to the news at first, leaving shares of Zillow to fall as much as 5.5% the following day. 

Magnifying glass highlighting 3D paper shapes of houses and buildings popping up from a newspaper

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What Zillow is (and isn't) doing

To be clear, Zillow representatives have already confirmed that the proceeds are not intended to fund the company's recently expanded its Instant Offers initiative. Still, there's no denying that Instant Offers will be a capital-intensive -- if controversial -- move given Zillow's plans to 300 to 1,000 homes for resale through the program by the end of 2018.

This raises the question: What, exactly, does Zillow plan to do with all that cash? 

First, Zillow will use a small portion (around $25.6 million) to pay the cost of capped call transactions to reduce potential dilution upon conversion of the notes. The remainder will be dedicated to "general corporate purposes," which could include run-of-the-mill general and administrative costs and capex.

But here's where things get interesting.

Zillow also elaborated that it "may choose to use a portion of the net proceeds to expand its current business through acquisitions of, or investments in, other businesses, products or technologies."

This shouldn't be terribly surprising. After all, thanks to its penchant for acquisitions in recent years, Zillow's portfolio of real estate-centric products includes not only its namesake website but also:

  • HotPads, acquired for $16 million in late 2012 
  • StreetEasy, acquired for $50 million in 2013
  • Trulia, acquired for $2.5 billion in stock in late 2015 (through which it also bought RealEstate.com)
  • Dotloop, acquired for $108 million in 2015
  • Naked Apartments, acquired for $13 million in 2016
  • Out East, launched earlier this year and built from its 2017 acquisition of Hamptons Real Estate Online
  • New Home Feed, acquired in late 2017 for an undisclosed amount

One possible acquisition target

Zillow Group offered the caveat that it has no agreements or commitments in place for any such acquisitions or investments right now.

I can think of at least one company that Zillow might love to bring under its wing: Move, Inc., which notably owns brands including Move.com, Moving.com, Relocation.com, and Realtor.com. 

But it won't come cheap. Move was acquired back in late 2014 by News Corp. for roughly $950 million. And though Zillow stands tall as the undeniable leader in the space, you can be sure Move has also continued to grow as consumers have steadily migrated to online real estate platforms over the past several years.

Moreover, the two companies have a history of clashing as they muscle for market share. Recall in 2016, Zillow even had to pay Move $130 million as part of a lawsuit settlement over the hiring of former Move.com executives, who it claimed were privy to sensitive information and trade secrets.

Still, the price may not be out of reach for Zillow yet, especially after combining Zillow's new offering proceeds with the more than $800 million in cash, cash equivalents, and short-term investments already on its balance sheet at the end of last quarter.  

Of course, Zillow would still need to get the deal past regulators, and that's not to say there aren't any number of other intriguing real estate brands that Zillow might be targeting.

One way or another, though, it's clear that Zillow is ready to expand its reach with its plush coffers. I think investors should be watching closely to see how this pans out.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zillow Group (A shares) and Zillow Group (C shares). The Motley Fool has a disclosure policy.