One of the few recent dot-com IPOs to be doing pretty well is taking on some more weight.
Shares of Zillow opened 4% lower this morning on the news, and rightfully so. The market rarely sees a secondary offering as a good thing. It's dilutive if the stock is coming from the company, and it sends the wrong message if insiders are bailing. Zillow's secondary offers a little bit of both.
However, let's briefly go over a few of the reasons why now may not be the best time to bail on dot-com darling.
1. Zillow is still a winner
Despite the secondary-related setback, Zillow has still more than doubled since going public at $20 last summer. Think about all of the flashier Internet companies that have gone public since then that currently trade below their IPO prices. Zillow's in a pretty good place.
Rival Trulia filed to go public last month. This doesn't happen if the market perceives Zillow to be a niche-validating winner.
2. If Zillow was a speedster when the industry was in a funk, it's going to be a locomotive now
This morning, Hovnanian
Why bet against Zillow now?
3. Bet against the company, and you'll regret it on a quarterly basis
I'm a big fan of companies that routinely beat Wall Street's profit estimates, and Zillow is the perfect example. The website operator is a perfect 4-for-4 in blasting through analyst income targets.
Source: Thomson Reuters.
Zillow isn't just narrowly beating the prognosticators. The company's blasting through those estimates.
4. More money isn't a bad thing
Having an extra 3 million shares is dilutive in theory, but let's not dismiss the roughly $120 million in proceeds here. If the company had simply sold these same shares at the time of its IPO, it would have drummed up less than half as much as it's making now.
Zillow intends to use the money raised for general corporate purposes, but it also may use a chunk of the net proceeds for acquisitions and investments that will make the company even bigger and better.
5. Zillow still works
The Zillow model is clicking with both real estate professionals and consumers.
There are now 33.5 million monthly unique visitors on Zillow, 61% more than the monthly average during last year's second quarter. As many Internet titans fret over mobile utilization and monetization, Zillow has jumped right in. There were 168 million homes viewed on Zillow Mobile in July across the company's 13 separate apps.
Real estate agents are also flocking to Zillow. There are now 22,696 professionals paying to be Premier Agent subscribers. In other words, Zillow's success in mobile isn't a matter of finding a way to wedge poorly performing ads into tiny smartphone screens. Agents are already paying for enhanced access.
So don't let today's secondary offering announcement scare you away, just as it spooked investors a month ago, when it originally filed the shelf registration that hinted at the eventual offering.
There's still plenty to like at Zillow.
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